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Scrabble pieces spelling the word "Budget" representing 2025 budget and what it means for HR Leaders

2025 Budget: Essential Guidance for HR Leaders

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The 2025 Autumn Budget is reshaping the UK business landscape. From rising employment costs to tax changes and evolving benefits structures, employers and HR leaders face a new reality that demands strategic workforce planning. These changes not only shift macro-economic conditions, but directly affect payroll, operating costs, benefits, and even the financial attractiveness of incorporation vs employment.
At Career Moves, we work with People Teams and business leaders not only to hire — but to help build smarter, more sustainable and more resilient workforces. Below, we outline what the Budget means for the world of work, what leaders should do now, and how to prepare for 2026 with confidence.

Implications for HR Leaders

HR teams will carry much of the operational impact of the Budget. Rising employment costs, benefit shifts and evolving employee expectations are placing increasing pressure on already stretched People functions.

Wage Cost Pressure

Minimum Wage and Living Wage increases mean that wages rise not only at the lower end of the scale, but ripple upward as organisations maintain internal equity between junior, mid-level and senior roles. This could drive significant payroll inflation.
To respond effectively, HR functions will need more data, clarity and structure behind their workforce strategy.

Potential Impact on Hiring Plans & Talent Retention

Our 2025 People & Talent Survey shows an ongoing trend: employees now see flexible working as a default, not a perk. Reduced efficiency of some salary-sacrifice pension schemes may intensify this expectation as employees look for alternative ways to maintain financial stability.
For existing staff, changes in pension and tax regimes could influence decisions about staying, retirement planning, or raising salary expectations. HR teams will need to rethink benefit offerings and the broader Employee Value Proposition (EVP) to remain competitive

Need for Financial and Strategic Review

The Budget introduces financial and structural shifts that are likely to influence hiring, succession planning and headcount decisions. Slower growth forecasts for the next two years mean many businesses are adopting more conservative hiring strategies.
Meanwhile, pressure on HR functions is likely to increase as People teams are asked to do more with less — from managing compliance changes to supporting restructures and rebuilding talent pipelines in a cautious hiring climate.

Flexible Workforce Solutions

Given increased employment costs, some firms may slow or freeze hiring altogether. We expect to see more strategic assessment of which capabilities are essential and which can be delivered through flexible or project-based talent.

HR leaders in a meeting

Implications for SMEs and Small Businesses

SMEs are expected to feel the Budget’s impact most intensely.

Higher Tax Burden for Owner-Managed Businesses

From April 2026, dividend tax rates will rise by 2 percentage points — reducing the attractiveness of extracting profits via dividends. CGT relief for Employee Ownership Trusts has also been cut from 100% to 50%, making certain exit routes less financially appealing for founders.
These changes will prompt many owners to review profit extraction methods, leadership structuring, compensation models and long-term growth or exit planning.

Business Rates Reform: Winners and Losers

While some smaller businesses and high-street operators may see relief thanks to lower multipliers, organisations in higher-value or central locations may face increased rates. For companies already grappling with rising wage costs and inflationary pressure, this may force a rethink of office location strategies and hybrid working models.

Labour Cost Inflation Hits SMEs Hardest

With limited financial buffer, SMEs may struggle to absorb wage increases — especially where payroll accounts for a substantial share of total costs. Many small business owners may be forced to consider:

  • Reducing hiring
  • Increasing part-time or temporary contracts
  • Outsourcing specific functions
  • Using contingent workforces to maintain capability without overextending budgets

What Organisations Should Do Now: Action Plan for HR Leaders

To navigate the Budget effectively, HR leaders should take a proactive, data-led and scenario-based approach.

  1. Scenario-Plan Multiple Workforce Models for 2026
    Explore multiple workforce scenarios for 2026, balancing permanent growth with internal mobility, phased hiring and skills development. Focus on where adaptability can strengthen capability without undermining culture or retention.
  2. Consider Interim Leadership
    Transformation and stabilisation agendas may require experienced leadership without long-term cost commitments.
  3. Reassess Total Reward & EVP
    Revisit benefits, flexibility, wellbeing and internal mobility. Ensure your EVP reflects what employees value most in 2026.
  4. Review Profit Extraction and Remuneration for Senior Leaders
    Where applicable, update compensation strategies to reflect tax changes.

Useful Resources & Deep Dives

Growth of the Contingent Workforce

As permanent employment becomes more expensive, organisations are shifting toward blended workforce models. The Budget accelerates this trend across both corporate and SME environments.

Recommended reads:


More Strategic Permanent Hiring

Permanent roles will increasingly focus on core capability — those that create direct value or continuity. Expect deeper scrutiny around: Business cases, role design, internal mobility pathways and long-term ROI

Recommended reads: Permanent Recruitment Solutions – Workforce Transformation Guide

Human Leadership in an AI-First World

Budget pressures coincide with rapid AI adoption. Effective communication, coaching and psychological safety will be critical retention levers.

Recommended reads: The Human Touch vs AI in Recruitment

Sustainable Workforce Planning

In an uncertain economic climate, sustainable recruitment isn’t just an ESG principle — it’s a resilience strategy

Recommended reads: Sustainable Recruitment: Building Better Teams While Building a Better World

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How Career Moves Can Help

The 2025 Budget presents real challenges for employers — but also opportunities for organisations ready to rethink how they structure, engage and invest in their people.
Contact Career Moves today to review your workforce strategy and navigate the 2025 Budget changes with confidence.

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