Fewer workers but higher wages – Is this what the UK job market looks like now?
There’s plenty of pessimism about the UK jobs market at the moment, but not every change is a bad omen.
With the Autumn Budget still two months away and many firms wary of making big moves, it is not a simple task to predict what comes next.
Still, the data we do have points to an emerging pattern of fewer employees on payrolls, but meaningful pay growth for those who remain.
We want to help you understand the ways you can adapt your business to keep pace with the changes in the UK job market.
Is the UK jobs market in trouble?
How you answer that depends on the metric you choose.
HM Revenue and Customs (HMRC) data shows a fall in payroll employment with a drop of roughly 8,000 fewer people on payroll, contributing to 127,000 fewer employees on payrolls than a year ago.
On the face of it, that sounds alarming.
However, context matters and it is important to note that wages are still rising.
The Office for National Statistics (ONS) reports that regular pay excluding bonuses grew by 4.8 per cent in the three months to July, down a bit from five per cent in the three months to June, yet still significant given the cost-of-living squeeze.
On the whole, it seems that employers are trimming headcount while maintaining or even increasing pay for the staff they keep.
That pattern could be reflecting some of the difficult choices that have been made recently.
Rising employer National Insurance Contributions (NICs), hikes to the National Minimum Wage (NMW) and National Living Wage (NLW), and other statutory costs have all forced businesses to rethink labour strategies.
Reducing the workforce can free up budget to retain key personnel with stronger pay and benefits, which in turn helps preserve capability and morale in a smaller team.
What can you do if employee costs are becoming a concern?
With the Autumn Budget looming, many organisations are understandably cautious about committing to long-term changes.
In the meantime, businesses should focus on control and preparedness.
It is imperative that they get a clear handle on payroll obligations and forecast likely costs under different Budget scenarios.
We can help stress-test your payroll to show how pay rises, NICs and other changes impact your cashflow.
Businesses should also consider the composition and capability of the team they retain.
Strengthening pay and support for core staff can be a pragmatic way to manage overall payroll spend while keeping the talent you need.
That does not mean leaving people to fend for themselves as there is still scope to invest in HR support, training and wellbeing so a smaller workforce can operate at full capacity.
Automation, smarter rostering and productivity tools can reduce manual effort and allow a leaner team to achieve more without overtime or burnout.
Where hiring is essential, flexible contracts and temporary resources can plug gaps without committing permanently to higher long-term costs.
We’re working with businesses to navigate rising employment costs through smarter payroll planning, benefits reviews and digital efficiency.
If you’re worried about the impact of headcount changes or need a payroll stress test ahead of the Autumn Budget, speak to our team.
We’ll help you balance compliance, competitiveness and the well-being of your people so you’re ready for whatever comes next.
For help managing your payroll obligations, speak to our team today!
