NI labour market: payrolls grew, wage costs up 5.4%

Reacting to: NI Claimant Count down 8.4% over the year (NISRA, 18 August 2026) →

The Northern Ireland Labour Market Report was published this morning. The claimant count is down 8.4% over the year to 33,300, the lowest count and the lowest rate since March 2020. Unemployment is at 2.0%. Confirmed redundancies over the last twelve months are 1,390, more than forty per cent below the 2,370 recorded a year earlier and the lowest twelve-month total since July 2023. On those measures, Northern Ireland's labour market is in its best shape for six years.

Two other figures affect employers' payroll directly. Over the year to July 2026, the number of payrolled employees in Northern Ireland rose 1.1%. Across the UK as a whole, over the same period and on the same measure, it fell 0.3%. And median monthly pay in Northern Ireland rose 5.4%, to £2,498, against a UK rise of 4.2%, to £2,642. Northern Ireland employers are adding staff while UK payrolls shrink, and pay here is rising faster than the UK average.

Why Northern Ireland pay is rising faster

The reason sits three tables further into the same report. Northern Ireland's economic inactivity rate — people aged 16 to 64 who are neither in work nor looking for it — is 26.4%. The UK figure is 20.9%. Our employment rate is 72.0% against a UK rate of 75.1%, and NISRA notes the NI employment rate has been consistently below the UK rate for the last fifteen years.

With unemployment at 2.0%, Northern Ireland has the smallest available labour pool in the United Kingdom, and more than a quarter of the working-age population sits outside the labour market. Most people you recruit here will already have a job.

The gap between 5.4% and 4.2% is the cost of recruiting people from other Northern Ireland employers. Over the year to April–June 2026 the NI unemployment rate fell 0.4 percentage points while the UK rate rose 0.2 points to 4.9%. The Northern Ireland labour market is tightening while the UK market loosens.

Hours worked are falling

Total weekly hours worked in Northern Ireland were 29.7 million in April–June 2026. That is up 0.9% on the previous quarter, but down 0.7% on the same period last year. Meanwhile payrolled employee numbers were up 1.1% over the year. Dividing one by the other, hours per payrolled employee have fallen by roughly 1.8% in a year.

The wage bill is rising while the hours it buys are falling. The payroll total shows the first effect and not the second.

Worked example: a 24-person firm in Co Antrim

Take an illustrative Co Antrim manufacturer — not a client, and the figures are built from the published medians so you can follow the arithmetic and swap in your own. Twenty-four employees, each paid at the Northern Ireland median.

This year. £2,498 a month is £29,976 a year each, so £719,424 of gross pay across twenty-four people. Employer National Insurance for 2026-27 is 15% on earnings above a secondary threshold of £5,000, which is £3,746.40 each, or £89,913.60 across the team.

A year ago. NISRA puts the annual rise at £129 a month, so the same person was on £2,369, or £28,428 a year — £682,272 across twenty-four. Employer NI on that was £3,514.20 each, or £84,340.80.

Gross pay increase over the year: £37,152
Employer National Insurance increase: £5,572.80
Total increase in employment cost: £42,724.80

Now run the counterfactual. Had that firm's pay moved at the UK rate rather than the Northern Ireland rate — £107 a month rather than £129 — the same twenty-four people would be on £29,712 each. Gross pay would be £713,088 and employer NI £88,963.20, an increase over the year of £35,438.40.

The difference is £7,286.40. That is what being a Northern Ireland employer rather than a UK-average employer cost this illustrative firm, on twenty-four people, in one year. On a business making £145,000 of net profit, that is £7,286 less profit.

What it does to your cost per hour

Say those twenty-four work a 37.5-hour week. After statutory holiday and bank holidays you are buying roughly 46 working weeks, so 1,725 productive hours per person, or 41,400 hours across the team.

Total employment cost this year is £719,424 of pay plus £89,913.60 of employer NI, less the £10,500 Employment Allowance, which comes to £798,837.60. Divide by 41,400 hours and an hour of work costs £19.30.

A year ago the cost was £682,272 plus £84,340.80 less £10,500, or £756,112.80. But the hours were about 1.8% higher on the NISRA comparison, so call it 42,150 hours. That is £17.94 an hour.

So the wage bill rose 5.4%, and the cost of an hour of work rose from £17.94 to £19.30 — £1.36 an hour, or 7.6%. If that firm quotes by the day, prices a job at last year's labour rate, or built this year's budget by adding five per cent to last year's payroll line, it is underpricing by about two percentage points on every hour it sells. On 41,400 hours that gap is worth roughly £15,000 a year, and it will never appear as a line in the accounts.

What this means for a Northern Ireland owner

If you sell time — trades, engineering, professional services, care, hospitality — your charge-out rate is now built on a stale labour cost. Rebuild it from cost per productive hour rather than from salary, and rebuild it from this year's hours rather than last year's headcount.

If you are about to recruit, budget for the Northern Ireland rate and not the national one. Job boards and salary guides are overwhelmingly built on UK-wide data, and on today's figures UK-wide data is running 1.2 percentage points behind what it actually takes to hire here. Our true cost of a hire calculator gets you to the loaded number before you agree a salary rather than after.

If you are holding headcount steady, your costs still rise. On these figures, the same team costs an extra £1,780 per person per year in pay and employer NI at the median. Five people is £8,900.

What to do this week

Work out your cost per productive hour. Total pay, plus employer NI, plus pension, less the Employment Allowance, divided by the hours you actually sell or use. Then compare it with the rate you are charging. Our management accounts report it monthly.
Check you are claiming the £10,500 Employment Allowance. It is worth £10,500 off your employer National Insurance bill and it has to be claimed — it is not applied automatically. Confirm the current rates and thresholds on HMRC's rates and thresholds for employers 2026 to 2027, and check your eligibility on gov.uk. If your payroll is not claiming it, you are paying £10,500 more employer NI than you need to. Our payroll and pensions service checks this as standard.
Look at the inactivity number as a recruitment channel. With unemployment at 2.0%, growth in your team has to come from the 26.4% currently outside the labour market — which in practice means roles built around school hours, phased returns, reduced weeks and adjusted duties. Go Succeed, funded by the UK government and delivered through Northern Ireland's eleven councils, provides free mentoring and business planning support to established NI businesses, and can help you structure those roles.

What is still uncertain, and when you will know

The survey changes are not statistically significant. NISRA is explicit in its own commentary: the Labour Force Survey "reports no statistically significant changes in employment, unemployment, or economic inactivity over either the quarterly or annual periods." None of the annual changes — unemployment down 0.4 points, inactivity down 0.2 points, employment up 0.5 points — cleared statistical significance. The report also states that LFS estimates "are official statistics in development", that some volatility remains particularly for granular breakdowns where sample sizes are smaller, and that ONS advise focusing on long-term movements rather than short-term changes. NISRA is currently transforming the LFS for Northern Ireland alongside ONS work in Great Britain.

That caveat does not apply to the payroll figures. The 1.1% headcount rise and the 5.4% pay rise come from HMRC's PAYE Real Time Information — actual payroll submissions from actual employers.

Whether the hours decline continues. One quarter is not a trend, and hours were up 0.9% on the previous quarter even as they fell 0.7% on the year. For context, the current 29.7 million hours a week sits 0.7% above the pre-pandemic level of October–December 2019 and 1.0% below the series high of 30.0 million recorded in April–June 2019. If hours keep falling while headcount rises, the cost-per-hour squeeze in the worked example above gets worse each quarter. The next Labour Market Report is published monthly by NISRA, so the September edition will tell you whether the July payroll figures held.

What the redundancy numbers are signalling. Confirmed redundancies are down over forty per cent on the year, at 1,390, but proposed redundancies are 2,780 — only about seven per cent below the 2,980 proposed a year earlier. Proposals usually come before confirmations, so a gap that wide is worth watching over the autumn.

How we help

For twelve months Northern Ireland labour costs have risen faster than the UK average while hours per employee have fallen.

Our advisory services work reviews cost per hour, charge-out rates and headcount decisions together. Our cashflow and budgeting work is where next year's payroll line gets built from this year's real rate rather than an assumed uplift. And our Ballymena office covers the whole of Northern Ireland.

AJ

Andy Jackson

Straight Talk. Real Solutions. Better Business. I'm here to make your business more efficient and client-focused — no fluff, just honest advice and real results. I'm not here to waste your time with fancy buzzwords or unrealistic promises. I work with businesses that want straightforward, practical advice on how to improve. I'm passionate about creating real impact through digital transformation, improved processes, and a laser-focus on client experience. andyjackson.com

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Common questions

Why is Northern Ireland pay rising faster than the rest of the UK?

Because Northern Ireland employers are hiring into a smaller pool. NISRA's August 2026 report shows NI median monthly pay at £2,498 in July 2026, up 5.4% over the year, against a UK median of £2,642 up 4.2%. Over the same year NI payrolled employee numbers rose 1.1% while the UK's fell 0.3%. So NI is the side of the comparison still adding staff. It is doing that with an economic inactivity rate of 26.4% against the UK's 20.9%, and an unemployment rate of 2.0% against the UK's 4.9%. Fewer available people, more employers competing for them, and the price of labour moves.

My wage bill went up 5.4%. Why has my cost per hour gone up more?

Because the hours shrank underneath the headcount. NISRA reports total weekly hours worked in NI at 29.7 million for April to June 2026, down 0.7% over the year, while payrolled employee numbers rose 1.1% over the year to July 2026. Put those together and hours per payrolled employee fell about 1.8%. You are paying more people, at higher rates, for slightly less total work. On the illustrative 24-person firm in this article, the wage bill rose 5.4% but the cost of an hour of work rose 7.6%, from £17.94 to £19.30. If you price by the hour or quote by the day and you only ever review the wage bill, you will underprice by roughly the difference.

What does an employee at the Northern Ireland median actually cost me?

Take the NISRA median of £2,498 a month, which is £29,976 a year. Employer Class 1 National Insurance for 2026-27 runs at 15% on earnings above a secondary threshold of £5,000, so that person carries £3,746.40 of employer NI, giving £33,722.40 before pension, holiday cover, equipment or software. The Employment Allowance of £10,500 offsets employer NI at business level rather than per head, so it reduces the total bill, and leaves the marginal cost of the next hire where it was. Against 1,725 productive hours a year, that £29,976 salary alone is £17.38 an hour before you add a penny of NI.

NI unemployment is 2.0%. Does that mean I cannot recruit?

It means the people you want are almost all already working somewhere, so recruitment is a poaching exercise priced against someone else's salary rather than an advertising exercise. But 2.0% unemployment is not the binding number. Economic inactivity at 26.4% is. Those are people aged 16 to 64 who are neither working nor looking, and they are more than a quarter of the working-age population, against 20.9% across the UK. That group is where any real growth in Northern Ireland's labour supply has to come from, which is why flexible hours, phased returns and adjusted roles are a recruitment strategy here rather than a perk.

Can I rely on these Labour Force Survey figures?

Treat the survey numbers and the payroll numbers differently. NISRA states plainly that the Labour Force Survey reports no statistically significant changes in employment, unemployment or economic inactivity over either the quarter or the year, and that LFS estimates are official statistics in development, with ONS advising users to focus on long-term movements rather than short-term changes. So the 2.0% unemployment headline is not a reliable signal that anything moved this quarter. The HMRC PAYE Real Time Information figures are different in kind. They are drawn from actual payroll submissions rather than a household survey, and it is those, the 1.1% headcount rise and the 5.4% pay rise, that show up in your accounts.

Or get in touch and we will reply the same working day.

Northern Ireland payrolls grew and paid 5.4% more while UK payrolls shrank