A recent survey by the Chartered Institute of Personnel and Development (CIPD), the professional body for HR and people development, indicates that a growing number of UK employers are preparing to reduce headcount in response to increasing costs and the upcoming rise in National Insurance contributions (NICs). CIPD surveyed over 2,000 employers and found that 32% plan to cut staff through redundancies or curbing new hires. This is the highest redundancy intention outside pandemic conditions in the last decade.
Falling employer confidence has been cited as a key factor, driven by recent announcements in the Chancellor’s first Budget that the secondary threshold for employer NICs will decrease from £9,100 to £5,000 in April. Coupled with the forthcoming rise in the national minimum wage, many businesses foresee a significant burden on overall employment costs.
Despite Government statements suggesting that the business tax rise would not harm ordinary workers, almost half (42%) of the organisations surveyed intend to increase prices in response to surging employment costs. Meanwhile, nearly a quarter (24%) have cancelled or scaled down planned investments in or expansions of their operations.
Rising NICs and minimum wage concerns
One of the central issues is that the majority of employers expect NIC changes to impact their budgets. Specifically, 90% anticipate higher employment costs, with 43% believing the additional burden will be felt “to a large extent”. The near halving of the secondary threshold is worrying for 40% of employers, who again rate the likely cost impact “to a large extent”.
In the previous quarter, just 11% of businesses anticipated staff cuts. That figure now stands at 16%. This shift aligns with the CIPD’s measure of net employment intentions, reflecting those who expect staff increases minus those predicting decreases. The index has fallen from +24 to +16 in the private sector, with the retail industry dropping from +23 to +1 within three months, making it the worst-hit sector. Hospitality has similarly declined from +18 to +7 over the same period, while construction registered a dip from +43 to +27.
Impact on training and recruitment
Another troubling development is the potential reduction in training budgets. One in five (19%) organisations plans to cut back on training expenditure. This has raised concerns about the longer-term effects on skills development, productivity, and competitiveness, especially when many sectors already report severe skills shortages. Around a third of employers describe their vacancies as “hard to fill,” with accountancy, education (49% experiencing recruitment problems), and construction (46%) among the most affected sectors.
Peter Cheese, Chief Executive at the CIPD noted:
“These are the most significant downward changes in employer sentiment we’ve seen in the last 10 years, outside of the pandemic. Employer confidence has been impacted by planned changes to employment costs, and employment indicators are heading in the wrong direction. Businesses have had time to digest these impending changes, with many now planning to reduce headcount, raise prices and cut investment in workforce training.”
“There are worrying signs some employers are shelving plans to hire new staff or train their people, or they expect to scale back plans to expand their businesses. If the Government’s plans are to succeed, it’s vital they set out how they will help businesses to support growth and investment. And it’s important this support is felt across the economy.
“This means fast-tracking consultation with employers on the design of the new Growth and Skills Levy and other changes to skills policy to help organisations upskill their workforces and to tackle technical skills shortages holding back the economy. It also means reviewing and improving support services available to smaller businesses in particular.”
Although these figures depict a challenging employment landscape, not all firms are downsizing; however, many are delaying hiring or trimming investment in workforce development. This is cause for concern for those who believe retaining and upskilling employees is vital for business growth and supporting the Government’s broader economic ambitions.
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