Business owners are increasingly hiring contractors and virtual staff following the increased National Insurance burden since April — and say they are also less incentivised to take on younger, inexperienced roles, which is feeding into the ongoing fall in payrolled employees.
One said: “We’re moving to the use of more contractors following April’s series of additional costs added onto hiring employees on payroll.” Another added: “Since April’s Employers’ National Insurance hike, I’ve resisted taking on full-time staff.”
The number of payrolled employees in the UK fell by 149,000 (0.5%) between June 2024 and June 2025, and by 26,000 (0.1%) between May 2025 and June 2025, according to official data published this morning.
The early estimate of payrolled employees for July 2025 decreased by 164,000 (0.5%) on the year, and by 8,000 (0.0%) on the month, to 30.3 million.
Meanwhile, the estimated number of vacancies in the UK fell by 44,000 (5.8%) on the quarter, to 718,000, in May to July 2025, suggesting the National Insurance hike is causing firms to not recruit new workers or replace workers who have left.
This was the 37th consecutive period where vacancy numbers have dropped compared with the previous three months, with vacancies decreasing in 16 of the 18 industry sectors.
Jonathan Moser, CEO at Mo’Living, said his firm now relies on contractors and virtual staff: “Since April’s Employers’ National Insurance hike, I’ve resisted taking on full-time staff. My property management business now runs entirely with 12 contractors and virtual assistants, both UK-based and overseas.
“The National Insurance increase raised employment costs enough to tip the balance; full-time hires mean fixed overheads, while contractors offer flexibility, scalability and access to specialist skills without the commitment of salaries, holiday pay or sick leave.
“Property management workloads can be unpredictable, so matching staffing to demand is vital. This model lets me grow sustainably, respond to market changes and control costs without compromising service quality. It’s not about paying less, it’s about staying agile in a challenging economic climate where the wrong hiring decision can put a business under strain.”
Kate Allen, Owner at Kingsbridge-based Finest Stays, has also gone ‘virtual’: “I’m fed up with paying more National Insurance after yet another hit from the Labour government. The best thing we’ve done lately is trial a virtual assistant for a couple of months. No HR hassle, no holiday pay, cheaper than hiring someone full-time and the quality is excellent. It’s scalable for process-driven jobs and I’d recommend it to any business owner.”
Debbie Porter, Managing Director at Bakewell-based Destination Digital Marketing, said the increased National Insurance burden is putting her off hiring junior staff: “We’re moving to the use of more contractors following April’s series of additional costs added on to hiring employees on payroll.
“The risk and the cost of investing in a younger or more inexperienced person is now too much for our small business, so paying out a much higher freelance rate, but for someone who already knows how to do the job with no additional support required, is much more economically viable.
“I am conflicted because I also have an 18-year old leaving education and trying to get his first job. The way I feel is exactly how other SMEs will feel about him and whether it’s worth taking the risk to hire him.”
Scott Gallacher, Director at Leicester-based Rowley Turton, said his firm is working smarter: “Rachel Reeves’ National Insurance raid means we have to work smarter. We’re not on a full hiring freeze — we’re bringing in maternity cover — but rising employment costs are pushing us to focus on efficiency, investing in systems, processes and technology to improve service levels and capacity rather than simply adding more people.”
