UK payrolled employee numbers have slipped to around 30.2 million, the Office for National Statistics confirmed this morning, as its September 2026 labour market bulletin laid out a jobs picture that is stable on the surface and quietly deteriorating underneath.
Payrolls fell by 26,000 in August alone and are down 145,000 on the year. That two-year slide is the defining fact the headline unemployment rate keeps obscuring: at 4.9% for the May to July quarter, joblessness looks broadly contained, yet the pool of people in actual employment keeps shrinking.
UK Payrolled Employee Numbers Have Been Falling for Two Years
The employment rate for people aged 16 to 64 was 75.1% in May to July 2026, down 0.1 percentage points on the year, according to the ONS UK Labour Market Overview. The economic inactivity rate for the same age group edged down to 20.9%. Both moves are small, but in the same direction: fewer people in work, fewer people actively looking.
Retail and hospitality are taking the most visible hits, as ONS director of economic statistics Liz McKeown made clear. Redundancies across all workers aged 16 and over reached 114,000 in May to July 2026, up 10,000 on the year, per the ONS Employment in the UK bulletin. That is not a crisis figure, but combined with the payroll trend, it suggests companies are managing headcount down methodically rather than dramatically.
McKeown put it plainly: ‘The labour market remains broadly stable, with employment and unemployment rates largely unchanged in the latest period. However, payrolled employee numbers continue to edge down, with falls over the past year particularly evident in the retail and hospitality sectors.’
Private Sector Pay Growth Is Softer Than It Looks
The wage figures are where the picture gets genuinely complicated. Total pay growth (including bonuses) slowed to 3.9% in May to July, down from 4.2% in the previous three-month period. Regular pay growth (excluding bonuses) held at 3.5%.
The 3.9% figure matters beyond workers’ pay packets: under the triple-lock mechanism, the state pension rises each April by whichever is highest among inflation, earnings growth, and 2.5%. With the May to July earnings figure now confirmed at 3.9%, that is the number the government will use to set next April’s pension increase, assuming CPI and the 2.5% floor stay below it.
But look at the public/private split and the headline average starts to mislead. Private sector regular pay rose by just 2.9%, while private sector total pay including bonuses came in at 3.2%, down from 3.7% in the previous period, according to the ONS Average Weekly Earnings bulletin. The last time private sector regular annual earnings growth was this low was August to October 2020, when it registered 2.4%. The ONS notes that private sector regular annual growth has now stabilised across three consecutive three-month periods after several years of decline.
Public sector figures are heading the other way entirely. Total earnings growth (including bonuses) for the public sector reached 6.6% in May to July, up from 6.2% in the previous period. Regular public sector pay came in at 6.3%. The gap exists almost entirely because NHS pay rises were paid earlier this year, creating a base effect that inflates the annual comparison. McKeown acknowledged as much: ‘There remains a notable difference between public and private sector pay growth, with public sector figures continuing to be affected by the timing of NHS pay awards this year.’
Against a CPI rate of 3.1% in the year to August 2026, according to the ONS Quarterly Economic Commentary, private sector workers on 2.9% regular pay growth are losing ground in real terms. Public sector workers, aided by the NHS timing effect, are not.
There is one genuine positive buried in the data. Total weekly hours worked across the UK economy reached 1,102.6 million hours in May to July 2026, up 8.3 million on the quarter and 13.6 million on the year, per the ONS Employment in the UK data. Companies may be hiring fewer people, but the people they have are working more.
Whether private sector pay growth stabilises at these levels or slides further will determine whether that NHS base effect fades quietly from next year’s comparison, or whether a widening real-terms gap between public and private becomes politically unavoidable. The Autumn Budget will be the first real test of whether the government treats 2.9% private sector pay as a floor or a warning.
