Employer NI Hike One Year On: What the Data Actually Shows

In April 2025, employer National Insurance contributions rose from 13.8% to 15%, while the per-employee threshold dropped from £9,100 to £5,000. At the time, business groups warned it would cost jobs. Government ministers argued the economy would absorb it.

Twelve months later, we have enough data to move past predictions and look at what actually happened.

The headline numbers

According to the ONS labour market overview published on 19 March 2026, payrolled employees in the UK fell by approximately 96,000 (0.3%) between January 2025 and January 2026. The House of Commons Library, using a slightly different measurement window, puts the decline at 109,000 in the year to January 2026.

That is not a collapse. But it is a meaningful contraction in a labour market that had been growing steadily since mid-2021.

Unemployment held at 5.2% in the three months to January 2026, unchanged from the previous quarter. The rate has been rising gradually from below 4% in early 2024.

Where the jobs went

The ONS PAYE Real Time Information data for January 2026 reveals a sharp divergence between sectors.

The wholesale and retail sector recorded the largest fall in payrolled employees, losing 65,000 over the year. Retail, already under pressure from weak consumer spending and the shift to online, was particularly exposed to the NI increase because of its large, low-wage workforce. The lower threshold meant employers were paying NI on a much larger portion of each part-time or entry-level salary.

By contrast, health and social work added 39,000 employees over the same period, the largest sectoral increase. Much of this growth was driven by NHS hiring commitments and social care staffing requirements that are less sensitive to short-term cost pressures.

For anyone working in or considering retail careers, this data is worth examining carefully. CareerMetrics’ Career Explorer shows median earnings and trajectory data across retail management, logistics, and customer-facing roles, which can help contextualise whether the sector’s structural headwinds are temporary or permanent.

Young workers took the hardest hit

Perhaps the most striking finding from the March 2026 ONS data is the generational divide.

The Guardian reported on 19 March that unemployment among 18-24 year olds rose to its highest rate since 2015, with almost 600,000 people in that age group out of work and looking for a job.

Martin Beck, chief economist at WPI Strategy, highlighted the scale: since payroll employment peaked in mid-2024, the number of employees aged 34 and under fell by almost 220,000, while employment among those aged 35 and over rose by 110,000.

The mechanism is straightforward. When the cost of employing someone rises, employers cut back on the roles with the lowest expected return. That means entry-level positions, graduate schemes, and junior hires. Experienced workers, who generate more revenue per pound of employment cost, are retained or even hired to replace multiple junior roles.

The Chartered Institute of Personnel and Development described the youth employment trend as “a huge waste of potential.”

For graduates and early-career professionals navigating this market, understanding where salaries actually land for your age group and experience level is essential. The Where Do I Stand tool on CareerMetrics lets you benchmark your earnings against others in your field and age bracket, based on real UK salary data.

Wage growth is cooling fast

Average earnings growth fell to 3.8% in the three months to January 2026, down from 4.2% in the previous period. Reuters reported this as the slowest pace of wage growth since late 2020.

The breakdown reveals an important split. Private sector regular pay growth stood at 3.3%, while public sector growth was 5.9%. The public sector figure is inflated by delayed pay settlements that included catch-up elements for the 2022-2023 inflation spike, which are now beginning to drop out of the annual comparison.

In real terms, with CPI inflation running above 3%, private sector workers are barely treading water. The post-pandemic period of strong nominal wage growth that allowed many workers to recover lost purchasing power appears to be ending.

CareerMetrics’ Salary Forecast tool uses historical ONS data to project earnings growth by occupation. For anyone weighing a job offer or considering whether to push for a pay rise, it provides a data-driven baseline for what growth rates your specific career path has historically delivered.

The employer cost squeeze is real

The NI increase added roughly 1.2 percentage points to the cost of employing someone on the median full-time salary of £39,039 (per the latest ONS ASHE data). For a business with 50 employees on median pay, that translates to an additional annual cost of roughly £23,000 to £25,000.

For larger employers, the Employment Allowance increase to £10,500 provided some offset. But for medium-sized businesses in labour-intensive sectors, the maths forced difficult choices: absorb the cost, raise prices, automate, or reduce headcount.

The CBI/Pertemps Labour Market Update for March 2026 noted that employer hiring intentions remained subdued, with firms citing the cumulative impact of NI increases, the National Living Wage rise, and energy cost uncertainty as the primary constraints.

What this means for career strategy

The data points to several practical implications for anyone managing their career in the current UK market.

First, sectors with structural demand for labour, particularly health, social care, and parts of the public sector, are more resilient to cost-driven hiring freezes. If career stability matters more than peak earnings, these sectors deserve serious consideration.

Second, the squeeze on entry-level hiring makes early-career differentiation more important than ever. Employers are hiring fewer juniors but still hiring some. The ones who get through tend to bring specific, demonstrable skills rather than general qualifications.

Third, private sector wage growth at 3.3% means that staying in the same role without negotiating is likely to result in a real-terms pay cut. Understanding your market rate, rather than relying on annual review cycles, is the difference between keeping pace and falling behind. Compare Paths on CareerMetrics lets you model how different career moves would affect your earnings trajectory over time.

Fourth, the generational employment gap suggests that mid-career and senior workers are in a relatively strong position. If you are in your mid-30s or older with relevant experience, the current market arguably favours you more than at any point in the last decade.

The bigger picture

The employer NI hike did not cause a jobs crisis. It did, however, accelerate trends that were already visible: a thinning of entry-level hiring, a widening gap between sectors that must hire regardless of cost and those that can defer, and a cooling of the wage growth that briefly gave workers pricing power.

Whether these trends reverse depends largely on factors beyond the NI rate itself, including energy prices, the Bank of England’s path on interest rates (currently held at 3.75%), and the broader trajectory of UK economic growth.

For individual career decisions, the numbers are clear enough. The labour market is functional but selective. The premium on understanding where you stand, what your options are, and what the data says about your next move has rarely been higher.