The April 2025 changes to employers’ National Insurance contributions have added new pressures to an already challenging UK jobs market.
Businesses now face higher costs when hiring staff, but how exactly has this affected recruitment patterns, and what does it mean for jobseekers?
What Changed in April 2025?
The key changes implemented in April 2025 were substantial. The rate of employers’ National Insurance rose from 13.8% to 15%, while the secondary threshold dropped from £9,100 to £5,000. This means employers now pay contributions on a larger portion of each employee’s salary at a higher rate.
These adjustments came alongside increases to the National Minimum Wage, creating a double financial impact for many businesses. The changes were part of the government’s strategy to address the fiscal deficit, as announced in the Autumn Budget 2024.
For a typical business with 50 employees earning the UK average salary, these changes represent thousands of pounds in additional annual costs. Small businesses and those in sectors with many lower-paid roles feel these effects most acutely.
How Employers Have Responded
The increased costs have prompted various responses from UK employers. Many companies have adjusted their hiring plans since the October Budget announcement, when these changes were first revealed.
The UK employment rate for people aged 16 to 64 years was estimated at 74.8%, but there are signs of this stabilising or even declining.
Some common employer responses include:
- Scaling back recruitment plans or implementing hiring freezes
- Reduced hours for existing staff rather than hiring additional employees
- Increased interest in contractor roles to avoid NI liabilities
- Adjustments to benefits packages, with more emphasis on non-monetary perks
Sectors most affected include hospitality, retail, and arts and recreation, particularly businesses with many lower-paid roles. For these employers, the combined effect of minimum wage increases and higher NI contributions has created significant financial pressure.
Broader Impact on the UK Jobs Market
Evidence suggests hiring confidence has stalled since the Budget announcement. The Net Employment Outlook, which measures employers’ hiring intentions, has flatlined despite continued appetite for business growth.
Quantitative modelling from Oxford Economics suggests these changes will lead to approximately 55,000 job cuts, a 0.2 percentage point rise in unemployment, and a 0.2 percentage point reduction in pay growth across the UK.
However, these changes don’t exist in isolation. The jobs market is also responding to other economic factors: weak demand, low profitability, and the lingering effects of inflation. The Employers’ National Insurance increase adds another challenge to this mix.
The Office for Budget Responsibility estimates that about 76% of the NI rise will be passed onto workers through lower real wages. This happens as employers attempt to offset higher costs by offering smaller salary increases, particularly for new hires.
What This Means for Jobseekers and Employees
For those looking for work or considering a job change, the market has become more competitive. Candidates face greater competition due to a significant slowdown in permanent job vacancies.
The British Chambers of Commerce suggests that one in four employees now feels at risk of unemployment—a notable increase from previous surveys.
Job hunters may notice:
- More contractor or temporary positions are being advertised
- Changes to benefits packages as employers seek cost-effective ways to attract talent
- Slower salary growth, particularly for new starters
- Longer hiring processes as companies become more cautious
This doesn’t mean opportunities have vanished, but the job search process may take longer and require more flexibility than in recent years.
Navigating Your Local Jobs Market
Understanding your local jobs market has never been more important. Regional variations exist, with some areas showing stronger hiring intentions than others.
For jobseekers, knowledge of local salary benchmarks is essential for effective negotiation. The typical salary for similar roles may have shifted, and awareness of these trends helps set realistic expectations.
Employers are increasingly selective, seeking candidates who can add immediate value. This makes upskilling and adaptability key assets in the current market.
Looking Ahead
The UK jobs market continues to adjust to these changes. While the short-term impact appears to be reduced hiring activity, the longer-term effects remain to be seen.
The combination of tax policy changes and broader economic conditions will shape the employment landscape throughout 2025. Monitoring these trends will help both employers and jobseekers make informed decisions in a changing environment.
For candidates facing this challenging market, staying informed about industry developments and maintaining a flexible approach to opportunities will be key strategies for success. If you would like to understand the local jobs market landscape a little better or require advice on salary information in this area, get in touch with us today.
