Only 33% of small business owners say they feel confident about hiring new employees, research has revealed.
Data from Enterprise Nation’s Talent Hub, which supports small businesses with no HR department, found while half of founders polled had recruited staff before, only 33% said they were confident to hire again.
Economic uncertainty and an increase in the cost of employment, such as concerns around the impact of the controversial Employment Rights Bill, are key considerations behind the decision.
In addition, three quarters of small businesses cited a lack of adequate training as the primary barrier to recruiting and retaining staff, while 25% reported difficulties in finding candidates with the right skills.
Polly Dhaliwal, COO at Enterprise Nation, said:
“We speak with thousands of founders each year. We hear their ambitions, but also their challenges. For many, hiring feels like a leap into the unknown: unclear processes, perceived risk, and little tailored support, particularly for those with fewer than 10 employees. This is why we launched Talent Hub – to demystify and simplify hiring for micro businesses, offering practical, free, and timely guidance.
“These findings underline the urgent need for clear guidance, especially as small businesses navigate a rapidly evolving hiring landscape influenced by AI, hybrid work, and emerging digital roles as well as economic uncertainty.”
Kevin Fitzgerald, UK managing director at Employment Hero which supports Talent Hub, added:
“Employment Hero’s data shows a clear U-turn in hiring over the past year. Small businesses quickly froze recruitment after the October 2024 Budget, holding back until they understood the costs. It’s been a tough year for employers and employees alike, so it’s no surprise many are struggling to hire.
“What worries me most is the sheer number of firms who lack adequate training. Three quarters of small businesses said that this is their biggest barrier to hiring and keeping staff. That’s a huge gap, and why it’s vital we give them the tools and insights to build the skills they need to grow.”
Employment Rights Bill
Earlier this week, the Employment Rights Bill returned to the House of Commons for debate.
MPs rejected amendments from the House of Lords. The government said they would have weakened the Bill, including watering down the day one right to protection from unfair dismissal and limiting those able to benefit from the ban on “exploitative” zero hours contracts.
Business and trade secretary Peter Kyle said:
“We are relentlessly focused on making people feel better off and putting more money into their pockets. Giving workers more security in the workplace is good for the economy. It promotes prosperity, enabling people to be more active consumers and exercise more control over their lives.
“Businesses have been consulted every step of the way and will continue to be. We are focused on building an economy with a new social partnership – workers, businesses and government fixing the foundations and that starts with security at work.”
Although the government insists the legislation is “firmly pro-business and pro-worker”, many business groups have strongly criticised for the Bill for the costs and bureaucracy it will impose on businesses.
The Institute of Directors (IoD) warned that the government’s rejection of the Lords’ amendments “sends an alarming message to business”.
Alex Hall-Chen, IoD principal policy advisor for employment, said:
“A perfect storm of government policies via the Employment Rights Bill, above-inflation increases to the National living Wage, and the increase in Employer National Insurance Contributions have significantly weakened the business case for hiring staff.
“An IoD survey of over 600 business leaders last month found employment regulation is the biggest regulatory blocker to business growth in the UK, with 45% citing it as a barrier to their company growing. At the same time, six in 10 cited employment taxes as negatively affecting their organisation.
“The government’s refusal to engage with sensible amendments made to the Employment Rights Bill in the House of Lords is sending a clear signal to businesses that their concerns are being ignored. With the return of the Employment Rights Bill to the Commons, we urge government to engage meaningfully with business to address its key concerns and restore business confidence in hiring.”
Successful small business recruiter
Although many small businesses are facing recruitment challenges, there are positive examples. The Enterprise Nation research found that digital-first roles, such as TikTok shopping presenters, AI specialists and e-commerce assistants, are on the rise and replacing traditional jobs.
Entrepreneur Lizzie Heyes recently recruited a TikTok live stream presenter for her business, Secret Halo. She said:
“Tik Tok live streaming is taking off! It’s a very specific niche role because you’ve got to be able to sell and present the brand live.
“I knew I needed a physical base to do live streaming from and went ahead last year and took on a space, knowing that eventually I would have other presenters not just myself. It wouldn’t work if they had to come to my home to do it.
“I could take on affiliates to do the live streaming from other parts remotely, but I wanted to keep it in house just so I can control how the product and the brand is presented.”
Heyes admitted she was nervous about the rising cost of employment, but also felt that employing someone was a risk she needed to take. “I hope I will be able to see a direct correlation between what they’ll be able to offer me by going live and getting sales,” she said.