Autumn Budget 2025

What the Changes Really Mean for Employers, Employees and the Future Workforce

The 2025 Budget delivers a mix of headline wage increases, targeted support for apprenticeships, and long-term tax reforms that will reshape employer cost models and employee take-home pay over the coming years. While financial markets reacted calmly, and in some cases positively, the Budget has drawn sharp commentary from economists and business leaders alike.

Senior economist Julius Probst, PhD, summarised the sentiment well in a recent LinkedIn Live:

“The Budget wasn’t the disaster many feared… but genuine growth-enhancing measures are missing. Minimum wage changes may prove harmful, and the salary-sacrifice reforms amount to a stealth payroll tax, albeit years away.”

At Orion Electrotech, we’ve broken down the key announcements and analysed what they mean for employers trying to plan ahead and employees navigating a shifting labour landscape.

National Living Wage rises from April 2026

• 21+ NLW: £12.21 to £12.71 per hour
• 18–20: £10.00 to £10.85 (8.5% increase)
• 16–17 & apprentices: £7.55 to £8.00 (6% increase)
• Accommodation offset rising to £11.10 per day

What this means for Employers

• Increased labour costs, particularly in production, logistics, and other blue-collar sectors that are already experiencing strong demand.
• Businesses with large entry-level or early-career workforces should budget for multi-year wage inflation.
• Potential compression of pay bands may require wider salary benchmarking to retain experienced staff.
• As economist Julius Probst warned, minimum wage growth without accompanying productivity measures risks squeezing profit margins.

What this means for Employees

• This will provide a welcome boost in income, especially for younger workers.
• Higher wages may improve job satisfaction and retention but could also mean employers become more selective when hiring.

Salary-Sacrifice Pension Contributions to Lose Full NI Relief (From 2029)

Currently, salary-sacrifice pension contributions avoid National Insurance (NI). But from April 2029, only the first £2,000 of sacrificed salary will remain NI-free.

Amounts above £2,000 will incur NI at:

• Employers: 15%
• Employees: 8% (up to £50,270) or 2% (above that threshold)

Impact on Employers

• A direct increase in payroll costs, effectively a stealth payroll tax, as analysts have described it.
• Employers should expect more queries from staff about reduced take-home pay.
• Now is the time to review benefits strategies, forecasting the 2029 impact early.

Impact on Employees

• High pension contributors will pay more NI, reducing the net benefit of salary sacrifice.
• Lower earners making modest contributions may see little change.
• Employees may need advice to optimise pension strategy before and after 2029.

Tax increases on Dividends, Rental Income and Savings

Budget 2025 also increases tax rates on:

• Dividend income
• Property rental income
• Savings income

Employees with investment portfolios or landlords supplementing their income will see reduced net returns. Early financial planning, using ISAs, pensions, or schemes such as EIS/VCT, will be increasingly important. Employers should prepare for more requests around financial wellbeing support from staff.

Fully Funded Apprenticeship Training for Under-25s in SMEs

From 2025/26, the government will fully fund apprenticeship training for all under-25s at SMEs. This extends support already available for apprentices up to age 21.

Additional benefits include:

• No employer NI on under-25 apprentices earning below £50,270
• £1,000 incentives for eligible 16–24 apprentices
• Levy transfers from large organisations to SMEs

What this means for Employers

• A major opportunity to address skills shortages without upfront training costs.
• SMEs now have enhanced ability to build pipeline talent in engineering, manufacturing, and technical fields.
• Apprenticeships become more cost-effective than ever, ideal for long-term workforce planning.

What this means for Employees

• Young people gain easier access to fully funded training, boosting their future employability.
• Increased availability of apprenticeship roles across sectors.
• For the businesses that we already support and partner with, this is a standout opportunity to reassess workforce development strategies.

Unfair Dismissal Rights – No ‘Day One’ Rule, but Big Changes Ahead

After significant pushback from employers, the government dropped proposals for day-one unfair dismissal rights. Reasons included:

• Strong opposition from employers worried about recruitment risks
• Rejection by the House of Lords
• Risk of delaying the whole Employment Rights Bill
• A negotiated compromise after discussions with unions and business groups

Instead, the qualifying period will reduce from two years to six months.

Impact on Employers

• Retains flexibility for the first six months, less risky than day-one rights.
• No new rules on probation periods, so existing policies remain valid.
• Encourages earlier performance management and onboarding clarity.

Impact on Employees

• Significantly improved job security – six months vs. two years is still a major shift.
• Short-term or temporary hires remain less protected, as there are still no day-one rights.

The overall effect of the Budget will lead to a balanced outcome that enhances worker protection while not overwhelming businesses with compliance burdens.

What These Changes Mean for the Labour Market

Economists note a divergence:

• White-collar slowdown
• Blue-collar resilience and wage growth

Minimum wage increases will intensify this trend by lifting lower-paid brackets, while salary-related tax changes affect higher earners.

Employers must adapt by:

• Strengthening workforce planning
• Reassessing benefits packages
• Investing in training and apprenticeships
• Enhancing recruitment strategies to stay competitive in a tightening labour market

Employees, meanwhile, should prepare for:

• Shifts in take-home pay
• Stronger job protections
• Increased access to training
• Changing employer expectations as costs rise

Industry Commentary

Remarking on the Budget announcement, Grant Nesbitt – Managing Director | Orion Electrotech commented:

“While Budget 2025 introduces several challenges, from rising wage bills to shifts in tax and employment legislation, it also brings genuine opportunity for forward-thinking organisations. The businesses that plan early, adapt quickly, and invest strategically in their people will come out stronger and more competitive.

The fully funded apprenticeship model is a prime example. It gives SMEs unprecedented access to developing young talent without the traditional financial barriers. For employers, this is a chance to build future skill pipelines; for young people, it opens the door to meaningful, long-term careers.

At Orion Electrotech, our focus is on helping both employers and employees adapt to this new landscape with confidence. Whether it’s guiding organisations through workforce planning, supporting them in leveraging apprenticeship schemes, or helping candidates understand how these changes affect their careers, we’re here to ensure every stakeholder benefits from the opportunities ahead.

Budget 2025 may reshape the employment landscape, but with the right approach and the right support, it can become a catalyst for long-term growth and success.”