Labour Market Report October 2025
The ONS has released its latest “Labour market overview, UK: October 2025” bulletin, covering the three-month period June to August 2025. We’ve pulled out the key points and what they mean for organisations managing staffing, pay and compliance.
Key headline numbers
The employment rate (age 16-64) is 75.1%, a slight decline of 0.2 percentage points from the previous quarter.
The unemployment rate (age 16+) is 4.8%, up by 0.2 points
The economic inactivity rate (age 16-64) is 21.0%, largely unchanged over the quarter but down on the year.
Vacancies have bounced around: the number of job vacancies was estimated at 717,000 in July–September 2025, a 9,000 (1.3%) drop on the quarter and the 39th consecutive period with a quarterly fall.
Average earnings in Great Britain: regular pay (excluding bonuses) rose by 4.7% annually; total earnings (including bonuses) rose by 5.0%.
Real earnings growth is weaker: adjusted for inflation (CPIH) regular pay rose by just 0.6%, and total pay by 0.8% in real terms.
What this means for payroll and staffing
1. Slowing employment growth / job creation
While employment is still higher than a year ago, the quarter-on-quarter drop in the employment rate suggests growth is stalling. For payroll teams this means fewer new hires may be coming through, or more cautious recruitment patterns.
Employers will need to monitor workforce numbers carefully and anticipate possible shifts in hiring strategy.
2. Rising unemployment and persistent inactivity
A rising unemployment rate and high inactivity rate (21%) highlight that a significant portion of the working-age population remains out of work or not looking for work.
For payroll operations this can mean increased complexity around onboarding, leaver processing or even wage-bill forecasting. Employers should continue to consider training, retention and internal mobility strategies.
3. Vacancies still falling despite worker shortages
The vacancy figures remain lower than pre-pandemic levels. For those managing payroll, this may mean that although there is potential demand for staff, fewer vacancies activated could signal caution from employers.
This is relevant when budgeting and forecasting for staffing costs, as well as for considering overtime, temporary staffing or alternative workforce planning.
4. Wage growth remains positive but real-terms gains are modest
Nominal pay growth at 4.7 – 5.0% is healthy on face value, yet when inflation is factored in the real-terms gain is minimal. Payroll teams should keep this in mind in respect of pay review cycles, pay compliance, living wage commitments, and future budgeting.
For clients of Mascolo & Styles, it may be a good time to review pay strategy: recognise staff value, but be mindful of cost pressures and inflation erosion.
5. Data quality caveats to keep in mind
It’s worth flagging that the Labour Force Survey (LFS) data used by ONS is subject to greater sampling variability at present, following issues with survey response rates and re-weighting.
As a result, payroll and HR teams should not rely solely on headline figures but use them as part of a broader set of labour-market insights (payroll data, PAYE RTI data, sector-specific intelligence).
Implications & recommendations for employers
Review your pay review timelines: With real-terms gain small, you may want to consider incentives, bonuses or non-monetary benefits to retain staff.
Keep hiring plans under review: If recruitment is slowing, ensure your staffing model is efficient and that payroll forecasting is aligned with likely recruitment changes.
Monitor workforce planning: With higher inactivity, consider training and internal mobility to tap into the existing workforce rather than relying solely on new hires.
Use data wisely: Don’t treat every quarterly labour update as definitive - use it to inform strategy, but blend with your own internal data (payroll, hiring, turnover) for decision-making.
Communicate with the finance/board teams: The labour market picture suggests stability, but not strong growth. Payroll cost pressures remain. Ensure budgeting reflects that.
Partnering for Payroll Stability and Value
For the UK labour market, the October 2025 figures show a degree of stability but also signs of caution. Employment remains strong in absolute number, but growth is stalling, unemployment is edging up, and real-term wage growth is thin.
For HR professionals working with Mascolo & Styles, this means balancing the need to reward and retain staff with careful cost control and realistic forecasting.
If you’d like to review your payroll management costs, get in touch – our team is committed to delivering dependable, efficient solutions at a fair price.
Source: ONS
