According to the latest Labour Market Outlook Report from the CIPD, UK employers have shown a significant decline in confidence due to rising costs and uncertainty around the world. Hiring intentions are at their lowest level since the COVID Pandemic.
As businesses react to global instability and rising costs of employment, the report notes that there is growing concern in all sectors, but especially retail and education.
The survey shows that the net employment balance, which is the difference between employers who expect to increase or decrease staff numbers in the next three month’s time period, has fallen from +13 to +8. This is the lowest level outside of the pandemic recorded since the measure was first introduced in 2014.
In the public sector the report shows a decline in confidence, with the net employment balance moving from +3 down to -4. In the private sector it dropped from +16 down to +11. Retail has been hit the hardest, dropping from +23 at Autumn 2024 to just -19 in this quarter. Retail employers expect only 10 percent to increase staffing, while 30 expect to reduce it.
Education is also facing pressure. The net balance in compulsory education is now -13. In non-compulsory, including vocational and higher, it has dropped to -7. In total, 61 per cent of employers intend to hire in the next three months. This is down from 64 per cent in the previous quarter, and 67percent in Autumn 2024.
The hiring intentions of large private employers are the weakest
Large private sector employers are most affected by the decline in staffing increases. In the last quarter, 39 per cent of private sector employers expected to see a rise in staffing levels. The number has dropped to 32%. According to the CIPD, one-fourth of employers (24%) plan to make redundancies in the next three months. This is the same as the previous quarter and higher than the 21 percent recorded during the Autumn last year.
The CIPD urges the government to consult with employers and develop a clearly defined implementation plan for the Employment Rights Bill. It warns that the uncertainty surrounding the legislation could be increasing pressures on investment and recruitment.
James Cockett is a senior economist in the CIPD’s labour market division. He said: “Employers across the UK are beginning to feel the full impact of the increases to National Insurance Contributions, and the National Living Wage, outlined in the budget for last year. The Employment Rights Bill and its potential impact on employment costs and plans are also being studied, especially in a period of global uncertainty. “Employer confidence is low, which is reflected in their plans to hire.”
He said that the Employment Rights Bill has landed in a “fundamentally different landscape” than what was expected when the bill was first conceived as if it were part of the Labour Manifesto.
Cockett stated that “it was always going be a big change for employers, but now they are operating in a world even more complicated.” It’s important that the government works closely together with employers to find a balance between the real risk of reducing investment in training, technology and people with their desire for reducing poor employment practices. The government can ease employer concerns by prioritising a plan of implementation with a clearly defined timeline and providing support and guidance to employers and small businesses.
Pay trends and redundancy practices are under scrutiny
The report also examined redundancy decisions taken by employers over the last year. The report found that 27% of employers implemented a redundancy program in the past 12 months. Half of those employers offered enhanced redundancy package, while 41% provided the statutory minimum. Nine percent of respondents were not sure what was offered.
The redundancy practices of larger and smaller companies are clearly different. Only 37 percent of large private firms provided redundancy payments, compared to 54 percent of smaller employers (with less than 250 employees).
Workers with less than two years’ service are not entitled to statutory redundancy payments. The report shows that 66 per cent of employers chose to offer some sort of financial assistance to these employees. About 25 percent of employers offered the statutory pay rate, and another 23 percent provided a sum between statutory and enhanced wages.
