Employer NIC hike drives record May job losses
What the latest employment data could mean for your business
If you’re an employer, you’re probably already feeling the pinch. And according to the latest data, you’re not alone.
Figures released by HMRC show that payrolled employment across the UK dropped by 109,000 in May 2025 — the sharpest monthly fall in four years. That drop has pushed the UK unemployment rate up to 4.6%, the highest it’s been since April 2021.
What’s behind the drop?
The standout reason? The recent rise in employer National Insurance contributions (NICs).
From 6 April, the rate jumped from 13.8% to 15%. And while that increase grabbed headlines, what’s hit many employers harder is the lower threshold at which NICs now kick in — it dropped from £758 a month to just £500. So more of your payroll now attracts NICs, even for part-time or lower-paid employees.
If you’re in hospitality, IT, retail or other labour-intensive sectors, the impact may be particularly stark:
- Hospitality jobs dropped by 5.6%
- IT and telecoms fell 3.4%
- Retail declined by 2.4%
London was the hardest-hit region, with payroll numbers down 2.3%, though the Scottish Borders and East Anglia also recorded notable losses. Vacancies fell by another 63,000, bringing the total down to 736,000, though competition for skilled workers — especially in construction, accountancy and healthcare — remains fierce.
What about wages?
The average regular pay rise (excluding bonuses) came in at 5.2% for the three months to April. That’s only slightly below March’s figure and continues to keep pressure on the Bank of England, which is watching wage growth closely as it weighs up further interest rate cuts later this year.
What should businesses do?
If you’re running a business with staff costs on your mind, it’s time to review your position. Here’s where I can help:
- Forecast the real cost of your staffing now that NIC thresholds have changed
- Model cashflow under different headcount or pay rise scenarios
- Plan ahead for potential further rate or policy changes this year
- Explore how software, outsourcing or restructuring might help reduce pressure
Even though these figures from HMRC are still provisional and could be revised, the trend is clear — labour is getting more expensive, and that means good planning is more important than ever.
Whether you’re looking to hire, restructure, or just make sense of your obligations under the new NIC rules, I can walk you through your options.
