Economic inactivity “remains a concern” as research from the CIPD shows recruitment is expected to slow, prompting calls for employers to maintain or boost flexible work options.
The CIPD’s Labour Market Outlook (Winter 2024/25) found that in the last quarter (Q4, 2024), 11 percent of employers said they expected to see a decrease in staff levels in the next three months, but this rose to 16 percent for Q1, 2025. And nearly a third (32 percent) of employers plan to cut headcount overall either with redundancies or by slashing recruitment plans.
Catherine Foot, director of Phoenix Insights, part of the Phoenix Group, said the findings highlight ongoing challenges in the labour market.
“With recruitment intentions slowing, economic inactivity remains a concern. To help close the gap in economic inactivity, pay alone isn’t enough to support workers back into employment. We need to look at factors beyond pay – flexible work is the top priority for workers over 50 seeking to remain in work,” she said.
“While many still face barriers to re-entering the workforce, our Employment Index reveals that access to meaningful, well-paid employment varies significantly across the UK.”
She explained that this disparity can impact long-term financial security, particularly for people close to retirement.
“Workers in regions with lower job satisfaction and financial security are less likely to save effectively for retirement. Flexibility is key to helping people stay in work longer to save and earn, but it’s not just about pay – it’s about creating an environment where people feel secure and supported in balancing work with health or caring needs.
“With vacancies declining, it’s important that roles provide flexibility, job security and inclusive recruitment. The government’s Employment Rights Bill and Get Britain Working white paper are steps in the right direction, but more action is needed to create a labour market that works for all.”
Mark Jones, reward and benefits partner at Isio, said that the sharp fall in employer confidence confirms that employers are facing a complex environment of rising costs, persistent skills shortages, and shifting workforce expectations.
“Small businesses, in particular, may struggle to expand their talent pools, which could limit long-term resilience,” he warned.
Pressure to stay competitive
Jones said: “With private sector confidence at its lowest in a decade, excluding the pandemic, employers are facing increased pressure to remain competitive, particularly in attracting and retaining key talent. However, pay alone isn’t the answer. Employers who take a broader view, investing in benefits that support financial wellbeing, flexibility, and career development, will be better placed to sustain engagement and productivity in the long term.
“To build a workforce that is both diverse and sustainable, businesses must rethink their approach to recruitment and retention. Creating opportunities for those facing employment barriers – such as older workers, parent returners, and individuals with long-term health conditions – isn’t just about inclusion; it’s a practical solution to ongoing talent shortages.”
