The recruitment sector is in a constant state of both evolution and change. Evolution comes as laws evolve, new technologies become available, and ways of working adapt to the market. Change is necessary because of geopolitical and economic issues that impact how businesses operate, the type of employees they need, and where they need those employees to be located. 

Even though the recruitment sector is in this constant state of both evolution and change, recent years feel like they have been supercharged, and nothing appears to be slowing down any time soon. 

Now in the second quarter of 2025 and looking forward to the next 12 months and beyond, how will employment laws, national insurance rates, and rising costs affect recruitment? 

What is Happening with National Insurance? 

This will be a quick recap as the 2025 increases in National Insurance are currently one of the most talked about topics in the recruitment sector. 

Here’s a summary: 

• Employer national insurance contributions are increasing from 6 April. 

• For Class 1 National Insurance, the threshold has been reduced to £5,000 a year and contributions have increased to 15 percent. 

• Contributions for Class 1A and Class 1B also increased to 15 percent. 

The employment allowance has also been changed which will help some employers offset, at least partially, the National Insurance increases. 

But, for almost all employers, these changes to National Insurance rates will mean increased costs. 

What About Other Rising Costs? 

Costs have been on a steep upward trajectory for most businesses now for well over a year. It is the steepness of that trajectory that can, in some situations, make it challenging to deal with. 
Raw material costs have increased. Staff salaries have increased. Travel expenses have increased. In fact, almost every business outgoing has gone up. And there is more to come as inflation remains high, the world teeters on the brink of a tariff war, and changes to the law come into effect (see below). 

What Employment Laws Are Changing? 

The National Minimum Wage went up at the start of April. It increased to £12.21 an hour for adults and there are also increases in the minimum wage for 18–20-year-olds (£10 an hour) and 16–17-year-olds (£7.55 an hour). 

One of the most notable features of the minimum wage increases is that younger workers are getting a much larger increase than older workers to bring them closer to the full minimum wage. 

Some statutory payments have also gone up: 

• Statutory sick pay increased to £118.75 a week. 

• Maternity pay, paternity pay, and similar family-related statutory payments increased to £187.18 a week. 

Looking further ahead, we have the Employment Rights Bill (ERB). It is still going through parliament and is not expected to be enacted until 2026, but it will bring significant changes when it does arrive: 

• Employees will get a right against unfair dismissal from day one of employment with the removal of the current two-year qualifying period. There are also other day-one rights in the bill, such as unpaid parental leave and paid bereavement leave. 

• A tightening of restrictions to prevent employers from engaging in “fire and rehire” practices. This primarily applies in situations where an employer rehires an employee or someone else to do the same job or tries to vary an employment contract without the employee’s consent. Situations like these will be automatic unfair dismissal. 

• Other changes in the ERB include an enhanced requirement on employers to prevent sexual harassment, restrictions on zero-hours contracts, and changes to flexible working requirements for employers. 

The Impact on Recruitment 

How will all these changes impact recruitment? The starting point as always with recruitment is to consider how the changes will affect the employer element of our “customer” base. 

The changes outlined in this blog can be summarised as increased costs and enhanced employee rights. As a result, there will be some employers who will be impacted more than others, including those who recruit low-paid workers, companies with large workforces, and businesses that operate on super-thin margins. 

Business leaders whose companies fall into one or more of the above categories have already been speaking about solutions, from reducing headcounts to passing on costs to consumers. At least some of those solutions will impact the recruitment industry. 

One Size Doesn’t Fit All 

It must also be noted the impact will be significantly less in large parts of the recruitment sector. This includes sectors with highly skilled and well-paid workforces. 

That’s not to say these sectors are immune from challenges. Take IT, for example. The technology sector might not be impacted by National Insurance rises to the same extent as hospitality or social care, but IT recruitment has been dealing with offshoring for well over a decade. It is also now dealing with the growing trend of companies replacing staff with new AI technologies. 

And even the most highly skilled and well-paid industries could get a pummelling if the tariff wars start to really pick up a head of steam or if inflation starts to return to early 2024 levels. 

The best advice now is to keep informed, communicate with all stakeholders, and then review, plan, and repeat.