UK Labour Market Trends and Payroll Impacts – October 2025
The UK labour market in October 2025 is sending mixed signals. While payroll employment figures show a decline, wages continue to rise, often linked to inflation clauses in contracts. This paradox presents both challenges and opportunities for businesses navigating payroll strategy in a shifting economic landscape.
At Pecunia Pro, we help businesses interpret these trends and adapt their payroll systems accordingly.
1. Employment Decline vs. Wage Growth
According to HMRC and ONS data, the number of payrolled employees fell by approximately 142,000 between July 2024 and July 2025. Sectors like accommodation and food services saw the steepest drops, while health and social care experienced growth.
Meanwhile, median monthly pay increased by 5.5 percent year-on-year, with transportation and storage leading wage growth at 8 percent.
2. Inflation-Linked Pay Deals
Many UK employers have adopted inflation-linked pay clauses to retain talent and support staff through the cost-of-living crisis. While this boosts employee morale, it also increases payroll costs, especially in sectors with tight margins.
3. Business Implications
This economic environment creates a tight squeeze:
● Rising wage bills clash with falling productivity,
● Regional disparities in job losses complicate workforce planning,
● The Bank of England faces pressure to balance interest rates between inflation control and job support.
4. What Payroll Teams Should Do
● Monitor wage inflation and adjust budgets accordingly,
● Prepare for policy shifts that may affect payroll taxes or benefits,
● Ensure compliance with evolving employment laws and reporting standards.
Final Thoughts
The UK labour market is in flux, and payroll teams must stay agile. Pecunia Pro offers expert support to help businesses navigate wage pressures, compliance risks, and strategic workforce planning.
👉 Need help adapting your payroll strategy?
Contact Pecunia Pro today for a free consultation and tailored payroll solutions.