Autumn Budget 2025: How to Support Your People and Your Pay Budget

Employers across the UK have been waiting with a mix of uncertainty and hope for Rachel Reeves’ announcement. Her statement delivered on 26 November introduces significant changes that will reshape how organisations plan, support and reassure their people in the year ahead. At Hapi, our focus is on helping employers rebuild the value proposition for their people while managing financial pressures. This means reshaping benefits strategies, delivering clearer financial education, and creating new pathways for savings and wellbeing support.

From April 2026, the National Living Wage (NLW) for workers aged 21+ will rise to £12.71 per hour, a 4.1% increase on the previous year. This above-inflation uplift follows several years of significant increases to the wage floor, which have steadily eroded pay differentials between the lowest-paid roles and those in adjacent grades - such as graduate, supervisory positions or deskless workers. 

As entry-level pay approaches higher bands, differentiation becomes harder to maintain, weakening the link between responsibility, skill, and reward. Employers will likely need to: 

• Review job bands and pay structures to preserve meaningful differentials.
• Allocate more budget to lower grades, which may reduce funds available for technical or managerial roles.
• Balance fairness at entry levels with competitiveness for senior positions in the market.

Headline inflation is believed to have peaked, with the OBR forecasting 3.5% for 2025. In contrast, median pay awards for 2026 are projected at 3%. When inflation continues to outpace pay growth, employees face a real terms pay cut feeling their salary stretch less each month. Over time, this gap can erode financial security. 

Budget measures, such as scrapping the two-child benefit cap, freezing rail fares, and reducing energy levies, aim to ease cost-of-living pressures. However, if inflation does not quickly return to the Bank of England’s 2% target, employers risk: 

• Morale and retention challenges, potentially leading to one-off “catch-up” payments. 
• Increased complexity in pay planning, as entry-level wages will rise faster than median awards. 

The Budget also signaled a major shift in salary sacrifice pension arrangements. From April 2029, a £2,000 cap will apply to the amount employees can contribute before incurring National Insurance charges. While this change is several years away, it will: 

• Increase costs for both employees and employers, especially where matching schemes exist. 
• Require adjustments to salary budgets to maintain competitiveness. 
• Prompt a review of total reward strategies, as benefits such as pensions may become more expensive. 

Employers should also consider offering financial education and advice, as rising costs may discourage staff from contributing to their pension pots. Hapi provides tools and guidance that make it easier for employees to plan, save, and maintain financial wellbeing even as pension arrangements evolve. 

The combination of a rising wage floor, persistent cost-of-living pressures, and changes to pension tax relief creates a triple challenge for business leaders and HR. Yet, it also presents an opportunity to rethink how benefits and support can strengthen the overall employee value proposition: 

• Move beyond annual pay increases to a holistic total reward approach. 
• Align benefits, wellbeing, and career development with business objectives and affordability. 
• Communicate clearly the full value of employment to employees. 

For employers, the Autumn Budget creates new pressures, but it’s also a moment to rebuild the employee value proposition. Hapi has consistently demonstrated that it improves communication, boosts engagement, and provides everyday financial and emotional wellbeing support. And we know that when employees feel genuinely supported - emotionally, financially, and day-to-day - they show up with more energy, loyalty, and belief in their organisation. And that’s when businesses thrive. 

We’re here to help you design your benefits strategy for this new environment, ensuring your organisation remains competitive and your people continue to feel supported, valued, and financially secure. Our experienced team will help you design your benefits strategy for this new environment, ensuring your organisation remains competitive and your people continue to feel supported, valued, and financially secure.