Thursday 28 May 2026 12:02 pm | Updated: Thursday 28 May 2026 12:03 pm

More Than Half of UK Businesses Say Hiring Has Become Harder as Employment Costs Rise by Almost 10% in a Year

Employment Hero, the AI-powered employment platform, has published new data revealing that more than half of UK businesses believe employing staff has become more complex in the past 12 months, as rising costs and fears around new employment law requirements put fresh pressure on employers.

The findings follow earlier research conducted by Employment Hero ahead of the implementation of the Employment Rights Act, which found businesses across the UK were already anticipating increased pressure on costs, compliance and hiring.

The new research, conducted in partnership with YouGov, is based on a survey of more than 1,000 business leaders across the UK and was carried out two weeks after the latest employment law changes came into effect on 5 April.

Complexity anxiety surges

The data found that 56% of businesses believe employing staff has become more complex over the past year, with almost a fifth (19%) saying it has become much more complex.

When asked to rate the complexity of the hiring process out of 10, respondents gave an average score of 4.7 three years ago, rising to 6.2 today – a 32% increase in perceived complexity.

Hiring under pressure

The reforms have triggered widespread concern. The findings reveal that over half of UK firms (53%) are worried about unintentionally breaching new employment laws.

This worry is directly influencing hiring decisions, with 78% of firms reporting that changes in employment have affected their ability to grow over the last year. Small businesses – which account for the majority of UK employment – are particularly concerned. Nearly one in five (19%) said new employment laws ‘significantly discourage’ them from hiring, compared with 11% of larger firms.

Rising costs weigh on businesses

Rising costs remain the most significant pressure facing employers. Business leaders reported that employment costs for full-time staff have increased by 9.6% over the past year, largely driven by higher salaries and rising National Insurance Contributions.

Two thirds (65%) of UK firms have experienced increased costs as the result of new employment laws, rising to 69% among smaller businesses with 10 to 49 employees.

This cost burden is felt across the full employment cycle, with more than half (51%) of firms reporting increases in HR administration costs, payroll processing and recruitment over the past 12 months. However, higher salaries remain the primary driver of increased costs, cited by 71% of firms. This rises to 84% in retail, hospitality and leisure – sectors particularly affected by National Minimum Wage increases.

Kevin Fitzgerald, UK Managing Director at Employment Hero, said: “SMEs are the engine room of the UK economy, but too many are now being asked to grow with one hand tied behind their back. Hiring should give business owners confidence, yet this data tells us that it’s actually what’s keeping them up at night as concerns grow around cost, admin and risk to their business and livelihood.

“We hear from employers every day who want to do the right thing by their people as well as grow and contribute to the economy, but they need clearer support and better tools to keep pace with change. The concern is that good businesses delay hiring, pause investment or stay smaller than they want to, because employment has started to feel too difficult. That is bad for businesses, bad for workers and bad for growth.”

Elissa Thursfield, Specialist Employment Lawyer and Managing Director of HRoes, added: “The data here reflects what we hear from SME employers every day. The concerns from business owners are very real, and these aren’t just conversations about how tough the landscape is. We are also hearing genuine fear from some employers about how sustainable it is to continue operating.

“It has been no simple task getting to grips with the new day-one obligations on paternity leave and statutory sick pay, whilst also trying to absorb the reduction in the unfair dismissal qualifying period from two years to six months from January 2027, and the highly complex rules coming in around zero-hours contracts and fire-and-rehire, all whilst running a business day to day. The answer for SMEs is not to step back from hiring, which is too often the response we see. The answer is to put the right tools in place, take guidance in bite-sized chunks, and make sure you have a trusted team around you.”