Employment Law and Job Market Tensions Put Businesses On Edge Ahead of Budget

With just over a month to go until the Budget, business leaders were always going to feel a little nervous around this time of year. But amid wage pressures, wavering recruitment confidence and rising competition compounding those issues, anxieties are continuing to rise. 

The job-hugging trend magnifies the extent of these issues. Employment Hero’s inaugural Jobs Report reveals that Fifty five percent of workers rank job security over ambition, while 51% have doubts that they can land a job within three months, reflecting a heightened sense of caution across the workforce. 

This tightening labour market is also reflected in the Employment Hero August 2025 Jobs Report, which shows overall employment growth slowing to just 0.6% month-on-month. 

Amendment rejections raise concerns

Last week, MPs voted down amendments to the Employment Rights Bill, many of which were backed by business leaders. Some of those measures included tweaking proposed day one protections against unfair dismissal to a six-month qualifying period for claiming unfair dismissal, softening the requirement to offer zero-hours and casual worker employees guaranteed hours and extending the 48-hour period for employee compensation on “short notice” shift changes.

With all of these stricter protections remaining in place, employers hoping to shore themselves up against yet more disruption to the job market are worried, with business leaders like Next’s Lord Simon Wolfson blasting the bill for potentially exacerbating hiring constraints for employers (vacancies for the retailer have fallen by 35% in two years, with applications up 76%). By the time the Autumn Budget rolls around, they may find themselves in even more of a pickle.

Sector strain and rising costs

Analysis from the UK Hospitality trade body and the Office for National Statistics projects as many as 111,000 job losses in the hospitality sector alone by the end of November, with similar strain continuing to impact the broader workforce.

Remnants of last year’s Budget announcements – namely lowering the employer National Insurance Contribution threshold and reducing business rate relief, both of which have seen employer costs rise significantly – are also continuing to put pressure on employers. The ONS reports that payrolled employees reduced by 127,000 in the year to August, while the number of vacancies have continued to fall each quarter, making this the 38th consecutive period where vacancies have dropped.

Business rate reform still uncertain

Judging by the Treasury’s latest interim report on business rate reform, worries have not been eased. After speaking to 230 organisations, business leaders have proposed measures that aim to reduce the financial fallout from last year’s reforms, including changing the current system, where one flat tax rate is applied to the entire property value, to a new system where different portions of the property value are taxed at different rates, with higher portions paying higher rates.

While those suggestions will not be confirmed until the Chancellor outlines them in the official Budget, the extent to which employers crave reforms and support for investment is apparent.

Employment trends – Full-Time vs Part-Time

Employment Hero data for September shows full-time employment remains relatively steady, rising 0.2% MoM and 3.9% YoY, whereas part-time and casual employment has contracted sharply, down 2.8% MoM and 2.9% YoY. The data aligns with concerns voiced by business leaders that labour supply is tightening in key areas.

Wage growth continues amid inflationary pressures

Wages are moving in the right direction but remain under pressure from inflation, with August seeing overall wage growth of 1.7% month-on-month and 4.1% year-on-year, continuing a steady climb since the post-Budget slump earlier this year.

The data highlights a labour market under strain. Employers are navigating slowing employment growth, rising costs, and tightening regulations, while full-time roles offer some bright spots. As the Autumn Budget approaches, the focus will be on whether government support and reforms can help businesses stabilize hiring and maintain momentum, or whether employers will face further constraints in an already challenging environment.