Full-time employment rose sharply last month as small and medium-sized businesses signalled cautious optimism ahead of the Autumn Budget. The UK jobs market saw its strongest monthly rise in over a year, with younger workers leading the recovery and employers favouring more stable hiring arrangements.
According to new data from employment platform Employment Hero, overall SME employment grew 2.6% in September — the biggest month-on-month increase since August 2024. Full-time positions accounted for much of the rebound, with roles up 2.1% from August and 5.0% year-on-year, while casual and part-time roles also rose more modestly.
Although job creation has slowed compared with last year, employers appear to be regaining confidence after a period of hiring freezes and uncertainty following the October 2024 Budget. That recovery remains fragile, however, with wage growth lagging behind inflation and concerns mounting over potential tax increases later this autumn.
Generation Z leads recovery
Employment Hero’s monthly Jobs Report is based on anonymised payroll data from over 100,000 employees at around 4,400 SMEs across the UK. Its latest findings show that employment rose 2.7% year-on-year in September, a modest increase from 1.6% in August but well below the 8.5% rise seen this time last year.
Generation Z saw the strongest growth of all age groups. Employment among 18- to 24-year-olds rose 2.8% month-on-month and 8.3% year-on-year, reflecting both the start of new graduate roles and the growing reliance on younger workers in sectors such as hospitality, retail and tech support.
Kevin Fitzgerald, UK managing director at Employment Hero, said the early signs of recovery were holding up despite ongoing uncertainty. “That said, year-on-year comparisons show there’s still plenty of ground to make up,” he added.
Wages under pressure
The report also shows average wages increased 3.0% month-on-month in September and are up 2.2% compared to the same time last year. But those gains are being eroded by the ongoing cost-of-living crisis. According to the Office for National Statistics (ONS), the consumer prices index including housing costs (CPIH) stood at 6.1% in August, meaning many employees are seeing real wages fall despite nominal pay increases.
Employment Hero’s annual workforce survey, published last month, found that nearly half of UK workers were unsure they could find a new job within three months if made redundant, while more than a quarter were juggling multiple roles to manage rising costs.
Among Gen Z employees, 47% reported having more than one job — the highest of any generation — suggesting that side hustles and part-time gigs are increasingly used to supplement low base pay.
Budget jitters return
With the Autumn Budget due in late November, employers are bracing for decisions that could affect payroll costs, taxes and training budgets. Last year’s Budget prompted widespread recruitment freezes and fears of delayed investment, particularly among smaller firms without cash reserves.
In a separate survey by Employment Hero, three quarters of SMEs said a lack of internal training resources remained a major barrier to growth and retention. Skills development, alongside tax stability, is expected to be a key theme in pre-Budget lobbying.
“Talk of tax hikes has been relentless and many now see them as inevitable. Despite that, small businesses — resilient as ever — are proving they’re not giving up, with employment nudging steadily higher as we head into November,” Fitzgerald said. “The government has a real chance to restore business confidence and recognise this resilience with the Budget.”
He added that the government of Prime Minister Sir Keir Starmer “has a real chance to restore business confidence and recognise this resilience with the Budget. Steering clear of tax changes that could stifle long-term investment will be key if we want to unlock the full potential of the UK jobs market”.
Mixed picture in wider economy
Despite September’s job gains, the wider UK labour market remains patchy. The latest ONS figures show an unemployment rate of 4.7% (May to July 2025), and vacancies have continued to fall — down 10,000 from the previous quarter.
Activity in the services sector also slowed in September, with the S&P Global/CIPS Services PMI slipping to 50.8 from 54.2 in August, citing softer demand. Construction remains in contraction territory, with its PMI at 46.2. Business leaders warn that without targeted support, the recent employment gains may not be sustained through winter.
In that context, SMEs are showing tentative signs of recovery, but the choices made in the Budget could determine whether the momentum continues or stalls. For now, the data suggests that when given room to breathe, smaller employers are willing to hire, train and retain. Whether that confidence lasts beyond October will depend largely on the policy decisions made in Westminster.
