The fingerprints of employer national insurance and living wage rises are starting to appear in employment figures as the latest ONS data revealed a fall in jobs and vacancies, while real pay is flat.
This is the first set of official job figures since the NI and minimum wage increases came into force last month.
ONS found that the number of payrolled UK employees fell by 47,000 (0.2 percent) between February and March 2025 and by 63,000 (0. 2 percent) between March 2024 and March 2025.
Early estimates for payrolled employees for April 2025 indicate a decline of 33,000 (0.1 percent) from March. The statistics body found they have fallen 106,000 (0.3 percent) from a year ago to 30.3 million.
The UK employment rate for 16 to 64 year olds was 75 percent for January to March 2025, while the unemployment rate stood at 4.5 percent for the same three months, up slightly from 4.4 percent in the three months to February.
The proportion of people classified as economically inactive fell to 21.4 percent for the same three months. But the UK claimant count for April 2025 increased from March and year on year, reaching 1.726 million.
Job vacancies fell by 42,000 to 761,000 in February to April 2025. ONS said this was the 34th consecutive quarterly decline with quarterly falls seen in 13 out of the 18 industry sectors. There were 34,000 fewer vacancies than for January to March 2020.
Average regular earnings grew 5.6 percent in January to March 2025, and annual growth in total earnings (including bonuses) was 5.5 percent.
Real terms pay growth (adjusted for inflation using the Consumer Prices Index including owner occupiers’ housing costs (CPIH)), was 1.8 percent for regular pay and 1.7 percent for total pay in the three months to March 2025.
Calculations by the Resolution Foundation found that the UK’s employment rate has fallen from a peak of 76.5 percent in April 2023 to 75.2 percent in March 2025. It calculated this by combining the latest HMRC payroll data, self-employment statistics obtained via a Freedom of Information Act request, and ONS population data.
The foundation said that until recently, the fall in the employment rate has been driven by employment failing to keep pace with population growth. But now job numbers are falling too.
It highlighted “further signs of labour market weakness” indicated by declining job vacancies in the first three months of the year, adding that another sign is slowing pay growth.
“Quarter-on-quarter private sector regular pay growth slowed from the equivalent of 6.4 percent a year, to 3.4 percent since the end of 2024. Real pay has flatlined, rising by only 0.1 per cent in the past six months,” the foundation stated.
“Early indications suggest the combination of rising employer NI and a higher minimum wage in April is having a dampening effect on employment,” the think tank added.
Nye Cominetti, principal economist at the Resolution Foundation, said: “While recent UK data on growth has been encouraging, the labour market picture is a major worry. The number of payrolled jobs has fallen by 72,000 over the past three months, while real wages have barely grown since last Autumn.
“The recent rise in employer NI may have accelerated this slowdown, with the number of hospitality jobs falling particularly sharply since the tax rise came into effect in April.”
Seemanti Ghosh, principle research fellow (economist) at the Institute for Employment Studies, said: “The first labour market data since the rise in NI and the increase in the national living wage indicates that employers continue to show caution in workforce investment. This is evidenced by another drop in job vacancies now at a new low, and a further decline in payrolled employees.
“Against the backdrop of a cooling labour market and shifting policy environment, the economic outlook for the UK remains uncertain. The underlying trends reveal a fragile environment, where hiring confidence is weak and workforce planning is marked by hesitancy.”
ManpowerGroup UK managing director Michael Stull said the data confirms the sentiment of most British employers “whose confidence remains stunned against a backdrop of significant national change and global uncertainty”.
He said: “Hiring for permanent positions has largely stalled, however demand for temporary staff is proving more resilient – especially in areas such as logistics, warehousing, and driving. This is likely a sign of businesses taking a more cautious but pragmatic approach to recruitment flexibility as they mitigate risk.”
He highlighted a standout trend in the automotive engineering sector, where he said his firm was seeing growing demand for professionals with autonomous driving expertise – from software simulation and infotainment specialists to traditional engineering roles in areas such as braking and autopilot systems.
Stull said this reflects a shift in manufacturing priorities and the knock-on effects of recent market volatility, which he said has transformed the competitive landscape and recalibrated both investment and innovation strategies.
“In tech more broadly, hiring is more subdued compared to the greater demand from organisations this time last year. The focus for many tech employers appears to be on business-critical backfilling rather than growth, even as AI and software development roles remain steady.
“With the UK government’s immigration whitepaper and the UK-US trade agreement adding to the latest employment challenges, businesses are working hard to futureproof the workforce and diversify talent pipelines but with stretched resources. We’re encouraged by a growing demand to re-engage NEET populations, particularly younger and older workers who have disengaged from the labour market. That said, there are no quick solutions to the complex labour market challenges and businesses will need to remain agile, resilient and flexible over the coming weeks and months.”
Julia Turney, partner and head of platform and benefits at Barnett Waddingham, commented: “With employer national insurance hikes now in effect and the Employment Rights Bill expected to progress over the summer, the months ahead will be a real test of how businesses manage the compounding pressures of cost and compliance.
“At the same time, employers are grappling with shifting workforce behaviours. Our research shows a third of UK workers – roughly nine million people – have taken or are planning to take extended leave from work. While this reflects a growing focus on wellbeing and balance, it raises real questions around workforce planning, business continuity, and long-term risk.
“Against a backdrop of rising regulatory obligation and cost pressures, acting now will be crucial to avoiding deeper disruption and long-term workforce instability. Using data to spot these trends early, while building agile strategies, will help to support flexibility while protecting business resilience. Otherwise, employers risk sleepwalking into talent loss, and compounding the very unemployment problem they’re already trying to navigate.”
