High Stakes for the UK Labour Market: Navigating Rising Employment Costs in the UK

The challenge of balancing wage bills with business viability will be a tricky one for employers and policy-makers

Escalating labour costs and rising employment taxes have emerged as key concerns in the UK’s labour market, particularly for businesses employing workers on or around the minimum wage. As highlighted in the recent report by the Centre for Policy Studies and discussed in People Management, these mounting costs stem from two primary forces: increases in the statutory national living wage (NLW) and intensifying National Insurance (NI) contributions. While higher wages can lift living standards for many low-paid workers, the growing tax wedge — encompassing both employer and employee taxes — also raises pressing questions about the sustainability of job creation, especially among smaller businesses. At the moment in the UK, we are seeing a plethora of jobs advertised that are fixed term contracts and this may be indicative of the realities being faced by Finance Directors as they budget for FY2025 adding to the hesitancy of budget holders to commit to the long term.

However, a central theme is the unprecedented rise in NI contributions for those on the lowest wages. The analysis projects that a full-time minimum wage worker will incur over £2,500 per year in NI costs by…