Yesterday the CIPD published their quarterly Labour Market Outlook and this included some important new data points for HR experts and employment professionals.
Hiring intentions down
The most striking finding was this one;
“Employer hiring intentions remain at the lowest level on record since we began collecting this measure in 2014, apart from during the first year of the pandemic”
So why is the employment outlook so bleak in the UK currently?
Economic growth
There is of course the continued low growth of the British economy. This long period of near stagnation – which dates back a decade to the Brexit referendum of 2016 – continued with the UK economy recording just 1.3% growth in the entirety of 2025, with the last two quarters of the year recording just 0.1% growth in each period.
Yet the economic backdrop is only part of a rather grim employment picture. For there are many other factors which are influencing the hiring decisions of employers.
Minimum pay & National Insurance costs
The National Living Wage (NLW) and National Minimum Wage (NMW) continue to increase at rates far in excess of average pay rises, and further large increases will come into force in April. These legally required minimum levels of pay pose genuine challenges for low margin sectors such as retail, hospitality and care. Yet the impact is felt far more widely, with the CIPD report suggesting that 72% of employers expect the NLW to increase their employment cost in the months ahead.
For an in-depth look at the challenges for employers please take a listen to this HR & Benefits Magazine podcast episode hosted by Occupational Health Assessment Limited’s Brand Ambassador, Steve Herbert.
Add to this the recent increase in the employer’s rate of National Insurance payments and it is clear that the direct costs of employment are a genuine concern for employers.
The Employment Rights Act (ERA)
Yet there are other factors that are also acting as a headwind for the employment outlook.
The Employment Rights Act starts to bite in 2026, and employers are worried about the impact on their employment plans. The CIPD research suggests that almost three in four (74%) of employers believe their employment costs will increase as a result of the ERA, with 17% expecting a large increase. These concerns are particularly acute in struggling sectors such as hospitality (28%) and social care (31%).
Salary Sacrifice changes
Another concern for some employers is the announced changes to pension salary sacrifice from 2029. Just over half (51%) of employers believe the £2,000 cap on such sacrifices will increase employment costs when it is introduced in 2029.
Sick pay and dismissal period changes
Yet another headwind is the change to make Statutory Sick Pay (SSP) payable from day 1 of absence. More than a third (35%) of employers believe this change will increase conflict and disputes, and there is of course a direct cost implication, particularly for more marginal employment sectors.
Lastly, the proposed change of the unfair dismissal qualification period from 2 years down to 6 months will also pose challenges for employers of all sizes.
Keep Britain Working!
All of which suggest that new vacancies will be few and far between in 2026, and that employers will have to deliver their business commitments and growth plans with much the same staffing levels as previous years. It follows that the need to keep employees fit, healthy, and (importantly) at work will become even more important for UK employers in the months immediately ahead.
This is also a natural segue to improved absence management procedures and indeed the Keep Britain Working review that we covered here last year. We will of course be looking further at both these issues in 2026 and at our next “fun & informative” webinar which is now open for bookings.
About Occupational Health Assessment Ltd
Occupational Health Assessment Ltd is an SEQOHS Accredited and Certified B-Corp nationwide occupational health provider.
We provide rapid access to expert occupational health support for businesses right across the United Kingdom. Appointments are available nationwide within two days.
With a unique occupational health assessment service, night worker health assessments, fitness certifications and access to clinics in Belfast, Birmingham, Bradford, Brighton, Bristol, Cardiff, Coventry, Derby, Edinburgh, Glasgow, Hull, Leeds, Leicester, Liverpool, London, Manchester, Newcastle, Northampton, Nottingham, Plymouth, Portsmouth, Reading, Sheffield, Southampton, Stoke, Surrey and more, the business provides high quality, expert medical advice.
Please contact us for further information or assistance.