Ann Frances Cooney – Employment partner at DWF

While employment rates have strengthened, businesses face mounting financial pressures from legislative reforms and rising costs.

The employment rate for those aged 16 to 64 rose to 74.9% between August and October 2025, an increase of 0.4 percentage points over the quarter. This places Scotland on par with the overall UK employment rate.

The unemployment rate also ticked upward, rising by 0.3 percentage points to 3.8%. Despite this increase, Scotland remains below the UK-wide unemployment rate of 5.1%.

Early estimates from HMRC indicate that median monthly pay for payrolled employees reached £2,562 in November 2025, a 1.1% increase compared to the previous year.

Ann Frances Cooney, employment expert and partner at DWF, highlights that while the headline figures show movement, the underlying reality for employers is one of “ongoing pressure”.

Although median pay has risen, the number of payrolled employees in Scotland decreased by 0.6% (-15,000) compared to November 2024. Ms Cooney attributes the squeeze on Scottish employers to a combination of persistent inflation, increased employer National Insurance contributions, and staff seeking pay rises to match the cost of living.

Beyond immediate economic metrics, the shifting legislative landscape is a primary concern for businesses. “The Autumn Budget did little to alleviate employer concern over rising employment costs. We now watch with anticipation the final stages of Parliamentary scrutiny of the Employment Rights Bill,” said Ms Cooney.

She explained: “The scrapping of day 1 unfair dismissal rights in favour of a six-month qualifying period should ease some pressure on employers. However, the removal of the compensatory award cap introduces a significant and unexpected risk, as potential liabilities for dismissal have increased substantially.

“As the Bill passes back and forth between the Houses of Parliament, employers are eager to see the final position on the cap.

“As businesses prepare for upcoming reforms, prioritising workforce resilience through forward planning and compliance readiness will be critical to minimising disruption and achieving lasting success.”