UK November 2025 Budget: Hiring & Employment Impact for 2026

The UK’s November 2025 Budget arrives at a defining moment for employers. With rising wage expectations, labour remaining tight, and major employment-law changes on the way, businesses need to start thinking now about how hiring will look in 2026.

Budget Changes Likely to Influence Hiring Costs 

The government’s working with a tight budget right now, so we’re unlikely to see big tax cuts or dramatic changes. As BBC News reports, the Chancellor is expected to focus on a handful of smaller tweaks that could still have a real impact on hiring. 

What might that look like for employers?

• Potential changes to allowances and reliefs that indirectly raise hiring costs
• Ongoing pressure to keep salaries in line with rising expectations
• Higher expectations around productivity and value per hire

Even small changes to employer National Insurance or payroll rules can make a noticeable difference to cost per employee, particularly in people-heavy sectors such as retail, logistics, and hospitality.

Day-One Employment Rights Will Reshape Hiring 

The Employment Rights Bill includes plans for day-one unfair dismissal protection, backed by a statutory probation framework. These measures aren’t in place yet, but they’re expected to roll out across 2026–2027.

What this means for employers:

• Higher upfront legal risk when onboarding new staff
• Greater need for structured, documented probation periods
• More selective and skills-focused hiring
• Reduced appetite for “train-up” hires and inexperienced applicants

All of this means our recruitment processes will need to be more robust, fair and fully documented so we can hire with confidence.

Hiring Pipelines May Tighten Before and After the Budget

It’s common for businesses to hit pause on hiring before a big Budget announcement, and we’re seeing the same pattern this year.

What’s likely to happen?

• Non-essential hiring pushed into Q1 2026
• Longer sign-off times for new roles
• More internal promotions instead of external hires
• Increased use of contract or fixed-term roles

This could lead to fewer job postings for a while and increase competition for available talent.

Skills Shortages Aren’t Going Away 

Even if hiring slows down, the UK’s skills shortages aren’t going anywhere. In fact, highly skilled people may become even more expensive as demand focuses on candidates who can hit the ground running.

What does that mean for employers?

• Rising salaries in specialist and technical roles 
• Less willingness to take on entry-level candidates
• More investment in upskilling existing employees
• A bigger focus on long-term workforce planning
  

To learn practical ways to bridge this gap, read our post on how to close the technology skills gap and build future-ready teams.

Payroll and Statutory Pay Updates

Employers will need to stay on top of the updated statutory pay levels:

• Statutory Maternity Pay (SMP):
  • 6 weeks at 90% of average weekly earnings
  • £187.18/week thereafter (or 90% if lower)
• Lower Earnings Limit (LEL):
  • £125 per week

These changes affect payroll, family-leave policies, and HR communications.

Employer Action Plan for 2026 

To stay compliant and competitive, businesses should:

• Future-proof HR policies for day-one rights
• Strengthen probation and performance-management frameworks
• Budget for potential increases in employment costs
• Focus hiring on roles that deliver the highest return
• Review L&D budgets to support upskilling
• Keep a close eye on Budget announcements for potential incentives

Need help preparing your hiring strategy for 2026? 

With significant changes on the horizon, now is the time to get ahead. Speak with our recruitment specialists today. We’ll help you prepare for the year ahead and ensure your hiring strategy is ready for 2026. 

Get in touch using the form below.