The UK hospitality sector has been hit hard since the Autumn budget, with figures recently published by the Office for National Statistics revealing the loss of 84,000 jobs in the sector since October 2024, accounting for 45% of all job losses.
Two major changes, effective from April 2025, have caused additional financial burden for the sector:
- the increase to employer national insurance contributions from 13.8% to 15%, while the earnings threshold was lowered; and
- rate increases to the national minimum wage (up to £10/hour for 18-20 year olds) and national living wage (up to £12.21/hour for those aged 21 and over) .
The additional costs have contributed to widespread job cuts, particularly amongst small and mid-sized operators. Whilst industry bodies, including UKHospitality, continue to lobby for policy reforms including seeking to reduce business rates and a cut to VAT for the sector, businesses have sought to implement survival strategies to address rising employment and business related costs.
From a staffing perspective and with significantly reduced staff numbers, hospitality businesses continue to demonstrate resilience including by:
- restructuring staffing models - focusing on training staff to handle multiple roles to improve flexibility;
- upskilling existing team members - investing in staff development to improve retention and productivity;
- focusing on employee engagement - celebrating achievements, maintaining transparent communication, offering wellbeing support including mental health resources and flexible work schedules.
Unfortunately, the current economic pressures on hospitality businesses mean that in many cases redundancies cannot be avoided. To minimise additional potential costs and liability which can arise from legal claims, businesses must ensure that fair and lawful processes are followed when reducing staff numbers. In particular, where 20 or more redundancies are proposed, this will trigger collective redundancy consultation obligations. Getting these processes wrong can lead to significant additional financial consequences and, if collective redundancy obligations apply, potential criminal liability if there is a failure to notify the government. Additional legal changes proposed by the Employment Rights Bill which will impact redundancy situations are also planned to come into force next year. This includes doubling the maximum protective award (from 90 days' pay per affected employee to 180 days' pay) for failure to carry out collective redundancy consultation correctly.
We have seen the hospitality sector demonstrate resilience time after time and believe that with the right support and strategic adjustments, hospitality businesses can adapt, recover and thrive again.
If you need employment support for your business, please contact lydia.christie@howardkennedy.com
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