Private sector hiring plans at record low as cost pressures mount

Hiring intentions among private sector firms remain at a record low, outside of the pandemic, as they grapple with increases in national insurance contributions (NICs) and other rising costs, according to the CIPD’s latest Labour Market Outlook. 

Just 57% of private sector employers plan to recruit staff in the next three months, down from 65% in autumn 2024.  

The hospitality and care sectors, and organisations that hire young people, have been hit the hardest by rising employment costs. 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, despite under-21s being exempt from employer NICs. 

In light of the findings, the CIPD is urging the government to renew its focus on supporting the employment and training of young people and ensure that proposed changes to the Employment Rights Bill don’t act as a further barrier to their recruitment. 

The latest survey of more than 2,000 employers from the CIPD, the professional body for HR and people development, found that: 

• 84% of UK organisations say their employment costs have risen since changes to NICs took effect in April 2025. 
• Nearly one in three (32%) employers say changes to NICs and wage rates in April have increased their costs to a large extent. This rises to half (50%) of employers in the care and hospitality industries. 
• 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. 
• Employers’ concerns are reflected in the survey’s net employment balance – the difference between employers expecting an increase in staff levels and those expecting a decrease in the next three months – which was +9, similar to the unprecedented low recorded last quarter (+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. 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.”

The CIPD’s latest Labour Market Outlook also finds that: 

• As with the private sector, confidence is also muted in the public sector, with more employers expecting to reduce, rather than grow, their workforce in the next three months. Here, the net employment balance is –6, with markedly negative scores in public administration (-12) and in compulsory education, which includes primary and secondary schools (-8). 
• Recruitment pressures are particularly evident in care, social work and other healthcare services, and are likely to be exacerbated by changes to immigration policy made in July. The net employment balance in this industry has fallen sharply from +23 last quarter to −2 this quarter. 
• Three in ten (31%) employers across the public and private sectors have hard-to-fill vacancies. 
• The median expected basic pay increase for the next 12 months remains at 3% overall for the fifth consecutive quarter. It is 3% in both the public and private sector.

Cockett continued:

“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.”

Read the latest Labour Market Outlook report