Research from Barnett Waddingham reveals that the Chancellor’s announcement of an increase to the National Living Wage by 4.1%, starting April 2026, will be detrimental for many UK employers, with as many as one in three (33%) believe that this change would have a detrimental impact on their business.
This comes alongside more of the Chancellor’s announced policies, and a change to salary sacrifice. From April 2029, the amount that is exempt from National Insurance contributions (NICs) will be capped at £2,000 a year for employee contributions made via salary sacrifice. One in four employers (25%) believe restricting the ability to offer salary sacrifice would have a detrimental impact on their business.
At a time where businesses have been increasing salaries to keep/attract skilled workers, 84% businesses said they increased employee wages in the past year. By company size, companies with 5,000 employees or more were less likely to have increased salaries/wages (77%), and more likely to have increased in values and purpose (82%).
Looking at the Autumn Budget, when questioned, businesses stated that the most beneficial changes that businesses were looking for, included:
- Mandating cheaper energy prices (76%),
- Better childcare solutions (71%),
- Tax incentives for R&D/innovation (70%),
- Private Medical Insurance tax breaks (68%),
- More guidance on addressing the ethnicity pay gap (66%).
Paul Leandro, Partner and Head of People Risk at Barnett Waddingham (BW): “While the Budget headlines have put the impact on everyday people in the spotlight, we should not forget the impact the Chancellor’s decisions will have on businesses. After last year’s National Insurance hikes, new tax rules, an increase in the National Living Wage and the removal of salary sacrifice on pension contributions will push some businesses beyond a squeeze and into suffocation.
“Many organisations now have little choice but to pursue cost saving initiatives and make greater use of technology, including AI, to manage rising costs. But this must be done carefully. Employers need to continue investing in their people and training, using workforce data to understand what their organisation truly needs and ensure technology supports jobs rather than replacing them wholesale. Removing lower skilled jobs in place of AI will bring short term savings, but could have ramifications on the effectiveness of future workforces. Where will the leadership and experience worker succession come from, if there are no younger employees cutting their teeth on entry level work?”
