Retail & hospitality braces for April cost crunch
Employment Hero, the global leader in HR, hiring and payroll software, has revealed new data indicating that UK Retail and Hospitality businesses are increasing wages sharply ahead of April, while slowed hiring signals mounting pressure on the sector.
Wages in Retail and Hospitality rose by 18% year-on-year in February, according to analysis of anonymised payroll data from 412 businesses across the UK, representing more than 15,377 employees. The increase is being primarily driven by the upcoming National Minimum Wage rise, prompting employers to raise pay ahead of the April deadline.
However, the data also points to a more complex picture emerging. Employment growth in the sector is declining – down -1.1% year-on-year and -1.5% vs. 3 months ago – suggesting that while wages are rising in the short term, job opportunities are becoming more limited.
This comes as businesses prepare for a wave of employment law changes, including the Employment Rights Act, which will come into effect in April. While the minimum wage increase is driving immediate pay rises, the broader legislative landscape is adding cost pressures and complexity, forcing many employers to reassess hiring plans, staffing models and overall workforce strategy.
Separate research from Employment Hero supports this shift in behaviour. A recent survey found that almost a third of UK businesses plan to adjust salaries and benefits in response to upcoming legislative changes.
The impact is being felt most acutely by younger workers, who have seen the largest wage increases, up nearly 30% year-on-year. However, there are growing concerns that this could create a short-term boost followed by a “cliff edge”, as rising employment costs lead businesses to reduce hiring, cut hours, or limit entry-level roles in the months ahead.
Kevin Fitzgerald, UK managing director of Employment Hero, said: “Our data reflects what many Retail and Hospitality businesses have been warning for some time. While the National Minimum Wage increase is driving an immediate uplift in pay, it’s landing at the same time as wider employment law changes that are increasing the cost and complexity of hiring.
“Businesses are having to make decisions now about how they structure their workforce going forward. For many, that means being more cautious about hiring, particularly in roles that have traditionally relied on part-time or younger workers.
“The risk is that what looks like a positive story on wages in the short term could translate into fewer opportunities in the months ahead. As pressure builds, we may start to see a slowdown in hiring that disproportionately impacts those trying to enter the workforce.”