The National Minimum Wage will be rising, the budget has been announced (a little earlier than planned!), and the government are still trying to get the Employment Rights Bill over the finishing line – what could these developments mean for your business from an HR perspective?
- National Minimum Wage Increases
- The Budget – Employee Related Matters
- Looking Ahead
- The Employment Rights Bill – Latest Development
National Minimum Wage Increases
The National Minimum Wage rates will be rising from April 2026, with 18-20 year olds receiving the greatest increase (8.5%). The NMW raises will increase the costs burden for many businesses, and will cause concern for some despite the Treasury stating that the new minimum wage rates struck a balance between “the needs of workers, the affordability for businesses and the opportunities for employment”.
The increased National Minimum Wage rates are:
| Wage Band | Rate from 1 April 2025 (£ per hour) | Rate from April 2026 (£ per hour) |
| Workers aged 21 and over (National Living Wage) | £12.21 | £12.71 |
| Rate for workers aged 18 – 20 | £10.00 | £10.85 |
| Rate for 16 and 17-year olds | £7.55 | £8.00 |
| Rate for apprentices under 19 and those aged 19 and over in the first 12 months of their apprenticeship | £7.55 | £8.00 |
For businesses that pay at or close to the current National Minimum Wage rates, it will be important to start planning ahead now to identify which workers/roles will benefit from the increases in 2026. This will help your business stay compliant.
The National Minimum Wage rate rises may create challenges for many businesses – not just those that pay at or close to the National Minimum Wage. Businesses that pay higher rates may find themselves facing workforce pressure for pay rises to keep in line with the upward trend in the National Minimum Wage.
If you are concerned that your business will find it difficult to pay employees correctly once the increased rates take effect or that there could be a wider impact on your business, for example, on your recruitment plans, please get in touch for specific advice on your situation.
The Budget – employee-related matters
The budget contained a lot and has undoubtedly got people talking. For businesses, some of the employee-related matters to have on the radar are:
- Funding to make training for people under 25 on apprenticeships free for small and medium-sized enterprises
- The introduction of a £2,000 cap on salary sacrifice into a pension with contributions above that taxed in the same way as other employee pension contributions, to come into effect in 2029
- “A national Digital ID scheme that will make it easier for citizens to use and access government services whilst helping combat illegal working. The new digital identity check will help enable participation in a modern digital society and facilitate the shift towards mandatory digital right to work checks in this country by the end of the Parliament”.
Looking Ahead
With many employers already feeling the pinch, thoughts on Budget Day will undoubtedly turn to assessing the financial outlook for the business in both the short and long term. For some, this could include considering taking action that may affect employees, such as proposing redundancies or making changes to terms and conditions (for example, if some benefits become unaffordable or changes in how they are provided need to be made).
If this resonates with you, it’s important to bear in mind that in most cases there will be a process to follow, and you should seek advice on the situation in your business before taking any action.
When it comes to redundancies, amongst other things, it will be vital to remember that:
- You need to have what in law is considered to be a ‘genuine redundancy situation’
- You will usually need to think about ‘pooling’ (which roles are at risk of redundancy), and where appropriate, fair selection
- You will usually need to meaningfully consult before any redundancies are made
- Consideration will need to be given to any suitable alternative work
- Where redundancies are made, redundant employees with two or more years of continuity of service will usually be entitled to statutory redundancy pay
Looking for further information on redundancies generally? You may be interested in our earlier Legal Updates:
- How to: Redundancies
- Redundancy and Cost Cutting
- Redundancy Business Cases – What Employers Need to Know
The Employment Rights Bill – Latest Development
The Employment Rights Bill (ERB) is currently stuck in the final stages of the legislative process, ‘ping-ponging’ back and forth between the House of Commons and the House of Lords as they struggle to reach agreement on key issues, such as day-one ordinary unfair dismissal rights.
Whilst we are still waiting for the ERB to head back to the Commons for further debate, speaking at the CBI conference this week, the Business Secretary has said that “there will be 26 consultations that will be launched once the Bill clears Parliament”, covering aspects of the ERB such as zero hours workers and day one rights. It’s likely that this would be where decisions on the practical operation of key areas will be made, and it may be intended to encourage the House of Lords to reach an agreement on the ERB. The Business Secretary also urged employers to participate in the consultations when they were launched to make their voice heard, emphasising that it was important to ‘get it right’.
We’ll continue to keep a close eye on the ERB and provide further updates in due course.
Need help with an HR matter? Please don’t hesitate to get in touch.