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The Government’s Autumn Budget 2025 brings in a set of financial and compliance changes that will reshape how employers hire, pay, and manage staff over the next few years.
If you rely on temporary workers, permanent hires, or both, these updates will influence your labour costs, pay expectations, and workforce planning.
Here’s a clear breakdown of what’s changing, when it’s happening, and what it means for you.
Key changes announced
- Here are the changes that will have the biggest impact on your staffing and workforce costs.
- Increases to the National Living and Minimum Wage rates
- New PAYE and NIC rules for the umbrella company market
- Freezes on income tax and National Insurance thresholds
- A future cap on NIC-free pension salary sacrifice
- Funding to boost youth employment and entry-level talent
Each of these will affect costs, compliance, and the way you structure your workforce.
Measures affecting you when working with a recruitment business for temporary staffing
From 6th April 2026
Umbrella Company PAYE and National Insurance Contribution Liability Reform
New rules mean that from 6th April 2026, if a worker is supplied through an umbrella company, the recruitment agency – or if there is no agency in the chain, the end client – becomes legally responsible for PAYE and employer NIC if the umbrella fails to do it correctly. The Government is also introducing powers that allow for joint and several liability across the supply chain for unpaid employer NIC.
This means:
- Higher compliance responsibility for agencies and end user clients.
- Exposure if an umbrella mishandles PAYE / NIC.
Considerations:
- Review all umbrella partners, and agency providers who use umbrella partners now – don’t wait until 2026.
- Ensure your temporary workforce are paid directly via a PAYE model – and prepare for potential cost increases if this is not currently the case.
- Build these compliance checks into your upcoming tender reviews and your workforce planning and engagement processes.
From April 2026
National Living Wage and Minimum Wage Increases
From April 2026 the new NLW / NMW wages will be:
- Workers aged 21+: £12.71 (increase of £0.50 / 4.1%)
- Workers aged 18-20: £10.85 (increase of £0.85 / 8.5%)
- Workers aged 16-17 and Apprentices: £8.00 (increase of £0.45 / 6%)
This means:
- A higher base cost for temporary workers.
- Rate uplifts from agency suppliers.
Considerations:
- Review temporary worker budgets well ahead of April.
- Update internal pay bands to remain competitive – you may also face upward pressure across adjacent pay bands, not just minimum wage roles.
- Talk to your recruitment partners early to avoid last-minute cost shocks – we’re ready to chat this through now, but finalised charge-rate numbers will be confirmed once the Association of Labour Providers (ALP) publishes its guidance in February.
2026-2031
Employer National Insurance Threshold Freeze
The employer NIC threshold is frozen until April 2031. As wages rise, more earnings fall within NIC liability.
This means:
- Employer NIC increases year-on-year.
- The total cost of temporary labour rises, even if headline pay stays the same.
Considerations
- Build NIC drift into longer-term workforce budgets.
- Consider where flexible staffing can help you manage cost peaks.
Measures affecting you as a direct employer
From April 2026
Youth Employment and Skills Funding
The Government has committed around £1.5 billion over the spending review period to support youth employment and skills development. This includes:
- A new Youth Guarantee, offering six-month paid work placements for eligible 18-21-year-olds who have been out of work or training for at least 18 months.
- A reformed Growth and Skills Levy, designed to fund shorter, more flexible training – with some employer-accessible courses expected to begin from April 2026.
- Broader reforms to apprenticeships and early-career routes, intended to expand access to entry-level work and training.
- The Government has not yet published full operational guidance for employers – but further detail is expected during 2026.
This means:
- Potential increase in junior and entry-level candidates from 2026 onward.
- Some sectors may see improved access to newly trained workers from short courses funded under the Growth and Skills Levy.
Considerations
- Expect a gradual rollout, with availability varying by region and training provider – so factor this into medium-to-long-term workforce planning rather than short-term hiring needs.
- Keep an eye on updates from Skills England, DWP, and HM Treasury as implementation details emerge – these will shape how quickly junior talent enters the market.
- Consider where entry-level placements or upskilled talent might fill gaps in high-turnover or lower-skilled roles once schemes are live.
From April 2026
Enterprise Management Incentive (EMI) Scheme Expansion
- The Government is widening access to the EMI share-option scheme. From 6 April 2026, more businesses will qualify because:
- The employee limit doubles from 250 to 500 employees.
- The gross assets limit jumps from £30m to £120m.
- The maximum unexercised options a company can hold increases from £3m to £6m.
- The exercise window extends from 10 years to 15 years, and this can apply retrospectively to existing EMI options (as long as they’re still active).
The rest of the EMI rules stay as they are, including the qualifying trade tests, but these thresholds mean many more established or scaling companies can now use EMI.
This means:
- EMI becomes a realistic option for businesses that previously “outgrew” eligibility.
- Employers gain a stronger tool for attracting and keeping specialist, senior or in-demand talent.
- Companies may lean more on equity as part of the reward package, especially if cash salary pressure rises due to minimum wage and NIC changes.
Considerations
- If you’re growing, it’s worth reviewing whether you now qualify, even if EMI wasn’t an option before.
- EMI may help offset increased wage expectations or rising employment taxes over the next few years.
- Make sure scheme design and administration are handled properly – EMI is tax-advantaged, but only if the rules are followed.
2026-2031
Freeze on Income Tax and Employee National Insurance Contribution Thresholds
Personal Allowance, Higher-Rate Threshold and employee NIC thresholds remain frozen until April 2031.
This means:
- More employees pushed into higher tax/NIC brackets.
- Reduced take-home pay over time (“fiscal drag”).
- Higher expectations during pay reviews.
Considerations:
- Plan for stronger salary-uplift pressure in coming years.
- Use benefits and reward frameworks where possible to support retention.
- Monitor engagement in lower-paid roles – those who feel the squeeze first.
2026-2031
Employer National Insurance Threshold Freeze
The employer NIC threshold remains until April 2031. As wages rise, more of each employee’s pay becomes NIC-chargeable.
This means:
- Your employer NIC bill will increase as salaries drift upwards.
- More roles will sit above the NIC threshold each year.
Considerations
- Build NIC drift into multi-year cost planning.
- Revisit headcount budgets to account for rising costs.
April 2029
Salary-Sacrifice Pension National Insurance Cap
From April 2029, both employers and employees will face a new limit on the National Insurance relief available through salary-sacrifice pension contributions.
- NIC-exempt salary-sacrifice pension contributions will be capped at £2,000 per employee per year.
- Any contributions above this cap will attract both employer NIC and employee NIC at the standard rates.
This change mainly affects higher earners or anyone making larger pension contributions via sacrifice.
This means:
- Increased employer NIC costs for staff who currently sacrifice more than £2,000 per year, whilst high-earning staff may see reduced tax efficiency on contributions above the cap.
- Existing reward structures based on pension sacrifice become less cost-efficient, and it may influence employee expectations around reward, bonuses, and benefits packages.
Considerations
- Identify which employees use salary-sacrifice above the £2,000 threshold.
- Reassess your reward and benefits offer for senior talent ahead of 2029.
- Communicate early and transparently so staff understand how they’re affected.
- Factor the additional employer NIC cost into long-term workforce budgeting.
What you can do now
You don’t need to wait until 2026 – planning now will put you ahead. Here’s where to start:
- Refresh staffing budgets for 2026-2031.
- Factor minimum wage rises and NIC drift into multi-year forecasts.
- Review umbrella supply chains and compliance frameworks.
- Reassess pay competitiveness and reward structures.
- Build planned rate reviews into your conversations with staffing partners.
- Prepare for higher expectations around pay and take-home earnings.
If you want to talk through any of this, from rates to workforce planning, we’re here.
We’re here to support you
The changes in this Budget will reshape staffing costs, compliance responsibilities, and workforce planning across the next five years.
Whether you’re looking to understand the impact on temporary staffing, prepare for umbrella compliance changes, or rethink your pay and benefits approach, we’re here to support you every step of the way.
Your workforce matters - let’s navigate this together.
