Employer confidence has dropped to a “record low” as data from the CIPD revealed that the rate of employers expecting to increase staff numbers in the next three months has fallen sharply among large private sector employers.
The data from the HR body’s latest Labour Market Outlook (LMO), shows that retail sector employers are worst affected as all businesses face rising employment costs and worldwide uncertainty. The CIPD said the data shows that employer confidence is at its lowest outside of the pandemic years.
The findings prompted the CIPD to reiterate previous calls for the government to consult with employers and set out a clear implementation plan for the Employment Rights Bill to limit its impact on hiring.
As employers face difficult budget decisions, 27 percent reported that they had made redundancies in the past year. Half of these employers said they had offered enhanced redundancy packages that went beyond legal requirements.
Results from the LMO, which surveyed 2,004 senior HR professionals and decision-makers in the UK in March and April 2025, showed that the overall net employment balance (NEB) (the difference between employers expecting an increase in staff levels and those expecting a decrease in the next three months) fell from +13 last quarter to +8 this quarter.
In the public sector, the NEB has changed from +3 to -4, while the private sector has seen its score drop from +16 to +11.
Almost a quarter (24 percent) of employers plan redundancies in the next three months. This is consistent with the previous three months but higher than the 21 percent who reported plans for workforce redundancies in Autumn 2024.
The worst affected sectors are retail and education, with retail’s NEB dropping from +23 in Autumn 2024 to –19 in the latest quarter. Only one in ten retail employers expect there will be an increase in staff levels in the next three months, while three in ten expect workforce cuts.
The NEB score among employers in compulsory education, which includes primary and secondary education, was -13, while employers in non-compulsory education, such as vocational and higher education institutions, reported an NEB of -7.
The CIPD said that overall, 61 percent of employers plan to recruit in the next three months, a fall from 64 percent in the quarter before and 67 percent in Autumn 2024.
Researchers said that the drop in employers expecting to increase staffing levels in the next three months is driven by large private sector employers. In the previous quarter, 39 percent of private sector employers expected there would be an increase in their staffing levels but this has fallen to 32 percent.
James Cockett, senior labour market economist at the CIPD, said: “From April, employers across the UK have begun to feel the full effect of increases to national insurance contributions and the national living wage outlined in last year’s budget. They’re also looking at the potential impact of the Employment Rights Bill on employment costs and plans, and this comes at a time of global uncertainty. Employer confidence is low which is being reflected in their hiring plans.
“The Employment Rights Bill is landing in a fundamentally different landscape to the one expected when it formed part of the Labour manifesto in summer of last year. It was always going to be a huge change for employers but they’re operating in an even more complex world now. It’s vital the government works closely with employers to balance the very real risk of reductions in investment in people, training and technology with their desire to reduce poor employment practice.”
He said the government can address employer nerves around the bill by prioritising an implementation plan with a clear phased timeline, alongside support and guidance for employers, and smaller businesses in particular.
The LMO also revealed that the median expected basic pay increase has stayed at 3 percent and is now 3 percent across the public, private and voluntary sectors.
A third of all employers have hard-to-fill vacancies, which rises to 44 percent in the public sector. Skills shortages are a particular issue for the education sector.
Reduced headcount
Tough decisions are being made, with 27 percent of employers reporting that they have conducted a redundancy programme in the last 12 months.
Within this group, 50 percent said they had offered affected workers an enhanced redundancy package that went beyond what is required under the law. More than two-fifths offered the minimum statutory amount and 9 percent didn’t know what offer was made.
CIPD data showed that smaller employers, with less than 250 employees, were far more likely to offer statutory redundancy pay (54 percent) than larger private sector employers (37 percent).
Under existing legislation, employees with less than two years of service are not entitled to statutory redundancy pay. Just under a fifth (17 percent) of employers didn’t pay anything to workers who lacked this minimum length of service. However, 66 percent of employers in the CIPD’s sample still gave these employees something to support their financial wellbeing.
A quarter gave statutory redundancy pay (based on their current service) and a similar proportion (23 percent) offered something between that and the enhanced rate offered to people with more than two years’ service.
Chris Britton, people experience director at Reward Gateway Edenred, said: “Often in times of budget constraints and uncertainty, businesses make the decision to cut headcount as a quick fix to save on cost to ride out the storm. The reality though, is that certainty always starts to come back and the economy always starts to do better. This then leaves organisations in the position of having to rehire people, often at a cost in regards to attraction, onboarding and speed to productivity.
“In my opinion, I would encourage businesses to think medium to long term. Find efficiencies in other places and let your employees know you are all in it together. This creates a culture of trust, transparency and, ultimately, high performance. Your employees can be the ones to help you ride out that storm and when the good times return, they are at full speed, engaged and everyone will benefit.”
