Marvin OnumonuHiring plans in the private sector dropped to their lowest level outside the pandemic, according to the latest Chartered Institute of Personnel and Development (CIPD) Labour Market Outlook.
Just 57% of private sector employers planned to recruit staff in the next three months, down from 65% in Autumn 2024.
Rising national insurance contributions and other costs were blamed.
The report found the hospitality and care sectors, as well as organisations hiring young people, had been hit the hardest.
Four in 10 (37%) employers that hire workers under 21 said national insurance changes had significantly increased their employment costs, compared to just 23% of those not hiring young people.
This was despite under-21s being exempt from employer national insurance contributions.
James Cockett, senior labour market economist at the CIPD, said: “Business confidence is faltering further under rising employment costs – and it’s sectors like hospitality and those offering vital opportunities to young people that are being hit hardest.
“Looking ahead, some measures in the employment rights bill risk adding further to the cost of employing people.
“This is why it’s crucial that planned measures, such as the introduction of a new statutory probationary period and process for dismissing new staff, are carefully consulted on to ensure they can work in practice.”
Cockett added: “If new employment laws increase the risk and complexity of recruiting and managing new staff, employers are less likely to take a chance on young workers with limited experience and more development needs.”
The survey of more than 2,000 employers found 84% of UK organisations said their employment costs had risen since the changes to national insurance in April 2025.
Nearly a third (32%) reported these changes and wage rates had increased costs to a large extent.
This figure rose to half (50%) for employers in care and hospitality.
When asked which cost increase had the biggest financial impact in the past year, 36% of employers cited the rise in national insurance, 15% pointed to energy costs, and 12% said minimum wage increases.
The net employment balance, which measures the difference between employers expecting to increase staff and those expecting to decrease, stood at +9, similar to the previous quarter’s low of +8.
Cockett said: “It’s crucial that employers aren’t forced to scale back on their recruitment and investment in apprenticeships and other forms of training for young people as their costs rise.
“Providing employment opportunities and developing the skills of young people is key to building sustainable talent pipelines and meeting future skills needs that support long-term business growth.
“We simply cannot afford for businesses to lose confidence in employing people if the government’s get Britain working agenda is to be successful and the economy is to grow.
“Where many employers aren’t expecting to grow their workforces in the coming months, they should monitor workloads and support staff with their wellbeing, particularly where vacancies remain unfilled.”
He added: “Investment in reskilling and upskilling opportunities will be crucial to keeping employees engaged and meeting business objectives.”
