Did the Autumn Budget give businesses breathing room with employment costs?

Although there were many who expected the Autumn Budget to contain a major overhaul that would get the economy fully back on track, the Chancellor seemed content to offer a number of smaller adjustments designed to create ‘breathing room’.

There was a clear focus on innovation and getting new businesses off the ground, but there was a sense that established businesses could have been overlooked and left to manage pressures without support.

Employment costs are the place where these concerns are most pronounced, so knowing how to mitigate the rising pressure while keeping employees happy is vital if a business is to continue growing.

Has the Autumn Budget reduced the pressures facing businesses?

It is evident that the Budget did manage to give some key sectors a sense of relief by reducing the costs that they face to operate.

In particular, around 70,000 more retail, hospitality and leisure businesses are set to pay no business rates at all due to the Small Business Rate Relief threshold changing from £12,000 to £18,000.

Businesses above the threshold will benefit from the rates being frozen and the 5p fuel duty cut remaining in place should further help businesses across the board.

Even small measures like these could help businesses tackle recruitment and retention issues, but those who are not subject to direct support are still set to face additional challenges as wages increase once more.

Both the National Living Wage (NLW) and National Minimum Wage (NMW) are set to increase by 3.9 per cent, resulting in 18- to 20-year-olds being paid £11.27 an hour and those over 21 earning £13.21 an hour.

Considering annual salaries, a worker on a standard 37.5-hour-a-week contract will earn £25,759.50 a year on the NLW and could earn as much as £27,476.80 if they work 40 hours.

Some relief can be felt by no further increases to Employer National Insurance Contributions being announced, but the 2025 rates mean that employers could be paying costs of 15 per cent on over £20,000 of an employee’s salary.

Taking together the wage itself, the NICs and pension contributions, it is believed that employers could be facing an annual bill of around £29,000 for a worker on NLW.

What can businesses do to keep employment costs under control?

Employment costs are one of the more difficult challenges to address, given that the legal minimum is beyond a business’s control and wages must also be filtered through employee expectations.

The businesses that likely benefited most from the Autumn budget are those that typically employ people on NLW, so they may find it manageable to absorb some of the rise given the relief provided elsewhere.

However, businesses that rely on graduates and those with more experience, skills or qualifications could face increased pressures to raise wages without having the breathing room to comfortably do so.

Resisting this pressure may be unwise, as graduates are unlikely to feel appreciated when working for fractionally more than someone just entering the industry or conducting ‘unskilled’ work.

Difficulties with matching pay to experience and expectations can lead to retention issues, further placing pressure on businesses as recruitment proves more challenging.

In fact, the Chartered Institute of Professional Development (CIPD) found in the summer that just “57 per cent of employers in the private sector plan to recruit over the next three months, which is the lowest figure since we began collecting this measure in 2016 (outside of the pandemic).”

A CIPD spokesperson added in the wake of the Autumn Budget that “additional cost pressures [were] likely to further dampen hiring, particularly among smaller employers.”

Onboarding talent and keeping it once you have it is a vital part of growing a business, but this is only possible by having a clear sense of your financial position.

Our expert team of accountants are here to help you with this, as we have reviewed the details of the Autumn Budget and can show you the ways in which you will be impacted.

Knowing how to access any available reliefs, operate in a tax-efficient manner and keep pace with regulations are all core parts of creating your own breathing room as a business.

Through this, it may be possible to manage employment costs and consider alternative ways of compensating staff that might better align with your budget.

Our clear financial forecasting can help you determine this as we model the impact of a variety of options so that you know the best fit for your business.

Getting prepared now will put you in a stronger position when the 2027 tax year commences, so speak to our team for expert accounting support.