78% of UK bosses say they can’t afford to hire anymore
Key Points
- The cost of employing UK staff has risen 9.6% in the past year, according to YouGov data commissioned by Employment Hero.
- 78% of UK business leaders say employment law changes have hit their ability to grow over the past 12 months.
- 71% name higher salaries as their biggest cost issue, rising to 84% in retail, hospitality and leisure.
- 19% of SMEs say new employment laws significantly discourage them from hiring, compared with 11% of larger businesses.
- 53% of businesses are worried about unintentionally breaching new employment laws, many delivered through the Employment Rights Act.
Almost four in five UK business leaders say employment law changes have hit their ability to grow, as the cost of employing staff jumps 9.6% in a single year.
The findings come from new YouGov data commissioned by Employment Hero, drawn from a survey of more than 1,000 UK business leaders.
The data shows the rising cost of staff is being driven by higher salaries, increased National Insurance Contributions and growing compliance demands, all of which are squeezing businesses from multiple directions at once.
“Small businesses are the engine room of the UK economy, but too many are now being asked to grow with one hand tied behind their back. Hiring should give business owners confidence, yet this data tells us that it’s actually what’s keeping them up at night as concerns grow around cost, admin and risk to their business and livelihood,” said Kevin Fitzgerald, UK Managing Director at Employment Hero.
Respondents rated the complexity of employment at 4.7 out of 10 when looking back three years, compared with 6.2 today. That 32% increase tracks the recent wave of legislative change reshaping how UK businesses hire, manage and retain staff.
More than half of businesses (56%) say employing people has become more complex in the past 12 months, with 19% describing it as much more complex. Just 2% believe prospects have improved.
Higher salaries are the dominant cost driver, named by 71% of businesses as their biggest issue. That figure climbs to 84% in retail, hospitality and leisure, the sectors most exposed to the recent National Minimum Wage increase.
69% of businesses with 50 or more employees say recent employment law changes have pushed up their overheads, and 51% report rising costs across HR administration, payroll processing and recruitment.
78% of firms say employment changes have affected their ability to grow over the past year, with the strain falling hardest on smaller employers. Nearly one in five (19%) of SMEs say new employment laws significantly discourage them from hiring, compared with 11% of larger businesses.
53% of businesses say they are worried about unintentionally breaching new employment laws, many of which have been delivered through the Employment Rights Act.
“These aren’t just conversations about how tough the landscape is. We are also hearing genuine fear from some employers about how sustainable it is to continue operating,” said Elissa Thursfield, Specialist Employment Lawyer and Managing Director of HRoes.
However, Thursfield said the right response is not to retreat from hiring.
“The answer for SMEs is not to step back from hiring, which is too often the response we see. The answer is to put the right tools in place, take guidance in bite-sized chunks, and make sure you have a trusted team around you,” she said.
“We hear from employers every day who want to do right by their people as well as grow and contribute to the economy, but they need clearer support and better tools to keep pace with change,” said Fitzgerald.
