The Office for National Statistics published a figure this week that looks like good news: the unemployment rate fell. Read past the headline, though, and the picture splits in two. Small firms, speaking to the same ONS survey, say labour costs are the main reason they are scaling back hiring plans.
Those two facts are not in conflict. They describe different parts of the economy moving in different directions, and the direction that matters to a business owner with revenue under $100 million is the second one.
Why labour costs are biting now
Three cost lines have moved against small employers over the past 18 months:
- Employer National Insurance contributions rose from April 2025, following the October 2024 Budget.
- The National Living Wage has increased each April for several years running, compounding on top of existing payroll.
- Pension auto-enrolment contributions and administration costs continue to add fixed overhead per employee, regardless of that employee's output.
None of these costs appear in the unemployment rate. All of them appear on a small firm's profit and loss statement, and all of them hit before a single new hire generates revenue.
The planning gap this creates
A founder reading that unemployment fell might reasonably expect hiring to be easier, or at least cheaper, as more candidates compete for roles. Instead, many owners are finding the opposite: candidates are available, but the fully-loaded cost of each hire has climbed faster than revenue has.
That gap between headline economic data and the actual cost of growing a team is a planning problem, not a hiring problem. It calls for three things most small firms do not have in-house:
- A rolling cash runway model that tests hiring decisions against 3, 6, and 12 month revenue scenarios, not just the current month's bank balance.
- A true cost-per-hire figure that includes employer NICs, pension contributions, onboarding time, and benefits, not just base salary.
- A workforce plan the board can actually interrogate, with assumptions stated plainly enough to challenge.
Where a fractional or interim CFO fits
This is precisely the gap a fractional or interim CFO is built to close. Unlike a full-time hire, a fractional CFO can be brought in for the specific stretch where hiring decisions, cost discipline, and cash runway all intersect, then scaled back once the plan is set and a controller or finance manager can run it day to day.
For a business under $100 million in revenue, that means getting board-level financial judgment on hiring and labour cost decisions without carrying a six-figure salary on the permanent payroll. Given that labour costs are now the stated reason small firms are pulling back on hiring, that judgment is not a nice-to-have. It is the difference between a hiring freeze that protects the business and one that quietly costs it growth.
