SME wage growth jumps to 8.8% as Employment Rights Bill pressures mount

Wage growth among UK small and medium-sized businesses rose to 8.8% year-on-year in February, up from 5.6% in January, according to the latest Jobs Report from Employment Hero.

The data, based on more than 120,000 employee records, suggests small businesses are playing a significant role in driving increases in household income, despite a challenging economic backdrop.

Growth was particularly strong in the North of England, where wages increased by 12.5% year-on-year.

However, the pace of wage increases has raised questions about sustainability, as SMEs continue to face rising costs and increasing regulatory pressures.

Employment growth also continued to improve, rising from 4.4% in January to 4.9% in February.

While this points to a steady recovery in hiring, employment levels remain below those seen before April 2025.

The report highlights the impact of upcoming Employment Rights Bill reforms, with 84% of small business leaders expecting to make changes in response.

Around 30% of firms said they plan to increase prices to offset the impact of the reforms, which could reduce the effect of rising wages on real disposable income.