Employment Hero says wages in UK retail and hospitality rose 18% year-on-year in February as businesses moved to get ahead of April’s higher labour costs, but the hiring picture is already weakening. The figures point to a sector paying more to retain staff while becoming markedly more cautious about adding new roles.
According to the company’s analysis of anonymised payroll data from 412 businesses, covering more than 15,377 employees, employment growth in retail and hospitality was down 1.1% year-on-year and 1.5% against three months earlier. In other words, pay packets are moving up sharply, but job creation is moving the other way.
The immediate driver is the National Minimum Wage increase due in April. Yet the data lands at the same time as employers prepare for broader employment law changes, including the Employment Rights Act, creating a more complex cost picture. For operators already contending with thin margins, the combined effect is forcing a rethink on hiring plans, staffing structures, and how much flexibility they can retain in front-line roles.
Separate survey work commissioned by Employment Hero suggests the shift is not confined to one sector. Almost a third of UK businesses said they planned to adjust salaries and benefits in response to upcoming legislative changes, reinforcing the idea that April is being treated less as a routine compliance date and more as a major cost inflection point.
The effect appears sharpest among younger workers. Employment Hero said employees in younger age groups recorded the largest wage gains, up nearly 30% year-on-year. While that may look positive on the surface, it also raises the prospect of a short-term pay lift followed by fewer entry-level openings if employers respond by cutting hours, slowing recruitment, or redesigning lower-paid roles.
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.”
The sector data is especially notable because it sits above Employment Hero’s broader March labour-market readings, which showed overall SME wage growth running well below the retail and hospitality figure. That suggests this is not a generalised wage surge across the economy, but a more concentrated response from industries that are especially exposed to wage floors, shift-based staffing, and immediate consumer demand pressures.
For retail and hospitality leaders, that leaves an uncomfortable balance to strike. Paying more may be unavoidable in the short term. Preserving hiring capacity after April may be harder.
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