Hiring plans among private sector employers have slumped to their lowest level outside the pandemic, as organisations deal with increased national insurance contributions (NI) and wider cost pressures, according to the CIPD’s latest Labour Market Outlook.
The proportion of private sector employers that intend to recruit over the next three months has dropped to 57 percent from 65 percent in autumn 2024. The sharpest impact is being felt in hospitality, care, and sectors that traditionally employ young people.
Nearly four in ten (37 percent) employers that hire under-21s say recent changes to NI have significantly increased employment costs, although under-21s are exempt from NI. This compares with just 23 percent of employers who don’t hire younger staff.
The CIPD has called on the government to bolster its support for youth training and employment to ensure that reforms proposed in the forthcoming Employment Rights Bill don’t further discourage the hiring of younger workers.
The institute’s survey of more than 2,000 employers found 84 percent reported that employment costs have risen since the NI changes in April 2025. Almost a third (32 percent) say the changes have increased their costs to a large extent, rising to 50 percent in care and hospitality.
More than a third (36 percent) said NI rises were the cost that has had the biggest impact, while 15 percent pointed to increasing energy costs and 12 percent to minimum wage increases.
The net employment balance (which shows the difference between employers expecting to expand or reduce headcount) was +9. This is slightly above the previous quarter’s “unprecedented” low of +8.
James Cockett, senior labour market economist at the CIPD, said: “Business confidence is faltering further under rising employment costs, and it’s sectors like hospitality and those offering vital opportunities to young people that are being hit hardest.
“Looking ahead, some measures in the Employment Rights Bill risk adding further to the cost of employing people. 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.”
In the public sector, hiring sentiment is also subdued. The net employment balance is -6, with especially negative expectations in public administration (-12) and compulsory education (-8).
The care and health sector is under additional pressure following immigration rule changes in July, with its net balance dropping from +23 last quarter to -2. Across all sectors, 31 percent of employers report having hard-to-fill vacancies.
Despite the challenges, expected median basic pay increases remain steady at 3 percent across both private and public sectors, unchanged for the fifth consecutive quarter.
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.”
