Employment costs rose 2.8 percent in the 12 months that ended in September, slightly less than they did in the year that ended in the previous quarter.
Option Elimination -
A. less than they did - the sentence after the comma "slightly less than they did in the year that ended in the previous quarter" is adverbial. Modifying what? Modifying "employment costs rose." "they" refers to "employment cost," and "did" refers to "rose." We are comparing the rise. "less" here is an adverb and modifies the verb "rise." ok. (less can be used as a determiner, pronoun, adverb, preposition, and adjective. Look for its usage in the sentence)
B. less than it did - "it" for plural "employment costs" is wrong.
C. less than they were - The idea here is to compare the rise and not the employment costs. Moreover, in ellipses, when we refer to the action verb, it is better to use "did" or "do" than the helping verb. The helping verb in the latter part is normally used if we used the helping verb in the earlier part. Wrong.
D. lower than -
Let's brush up on the basics here.
1. "less" is used to compare two quantities or amounts. It is used to refer to uncountable nouns or a collective quantity. E.g., She has less money than her sister.
2. "low" is an adjective used to describe a state or the condition of being at a small distance from the bottom, base, or minimum. It is used to compare one thing with an absolute standard or to describe general characteristics. E.g., The temperature is low.
3. "lower" is a comparative adjective used to indicate a lower degree, rank, or position compared to something else. It is used when making a specific comparison between two or more items. For example, The temperature in New York is lower than the temperature in Miami.
The bottom line is that "lower" is an adjective and can not be used to refer to a verb i.e., "rise." Moreover, "the rise" is compared with "in the year," a comparison that doesn't make sense. Wrong.
E. lower than they were - Same issues as in D and C.