Private sector hiring intentions are at a record low as employers deal with higher national insurance and wage costs, according to the CIPD.
Only 57% of private sector employers plan to recruit staff in the next three months, down from 65% in autumn 2024, according to the HR body’s latest Labour Market Outlook.
Eighty-four per cent of employers told the CIPD that their employment costs have risen since NIC changes took place in April this year.
The sectors hit hardest are hospitality and care, where 50% of employers have seen costs rise significantly compared with 32% of all employers.
Labour market
When asked which cost increase had the biggest financial impact on their organisation in the past year, 36% of employers said it was the rise in NICs, 15% said energy costs and 12% cited minimum wage increases.
Meanwhile, nearly four in 10 (37%) employers that hire under-21s report that NICs changes have increased their employment costs to a large extent, compared with just 23% of employers that don’t hire young people. This is despite under-21s being exempt from employer NICs.
The net employment balance, the difference between employers expecting an increase in staff levels and those expecting a decrease in the next three months, was +9 in this quarter’s outlook. Last quarter, it was +8.
James Cockett, senior labour market economist at the CIPD, warned that costs could continue to escalate. “Looking ahead, some measures in the Employment Rights Bill risk adding further to the cost of employing people,” he said.
“This is why it’s crucial that planned measures, such as the introduction of a new statutory probationary period and process for dismissing new staff, are carefully consulted on to ensure they can work in practice.
“If new employment laws increase the risk and complexity of recruiting and managing new staff, employers are less likely to take a chance on young workers with limited experience and more development needs.”
Confidence was also muted in the public sector, where the net employment balance was -6, and hit -12 in public administration and -8 in compulsory education. In care, social work and healthcare, the employment balance plummeted from +23 last quarter to -2.
In both private and public sectors, 31% of employers have vacancies that are difficult to fill.
The CIPD urged employers to invest in young people despite the rising costs. Cockett added: “It’s crucial that employers aren’t forced to scale back on their recruitment and investment in apprenticeships and other forms of training for young people as their costs rise.
“Providing employment opportunities and developing the skills of young people is key to building sustainable talent pipelines and meeting future skills needs that support long-term business growth.
“We simply cannot afford for businesses to lose confidence in employing people if the government’s Get Britain Working agenda is to be successful and the economy is to grow.
“Where many employers aren’t expecting to grow their workforces in the coming months, they should monitor workloads and support staff with their wellbeing, particularly where vacancies remain unfilled. Investment in reskilling and upskilling opportunities will be crucial to keeping employees engaged and meeting business objectives.”
Decline in perm and temp placements
Also published today (11 August), the Report on Jobs from the Recruitment and Employment Confederation painted a similar picture.
It revealed a rapid upturn in candidate supply amid reports of redundancies, and a continued decline in both permanent placements and temp roles.
Starting salary inflation slipped to its lowest level in four and a half years, the REC found.
Kate Shoesmith, deputy chief executive of the REC, said the Bank of England made the right decision last week to cut interest rates.
“More action like this, to stabilise the business cost base, is what will support growth and boost the jobs market this year, she said. “Fluctuations in permanent and temporary job placements signal a labour market that remains resilient but uneven.”
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