25 November 2025
The Autumn Budget salary sacrifice pension cap predictions suggested UK businesses were in for another turbulent year in 2026. Salary sacrifice schemes, particularly those related to pensions, have been invaluable for both employers and employees, enabling individuals to plan for a brighter future in a way that's sustainable for businesses to support in the long term. While the predictions were accurate, neither employer nor employee will face any immediate changes; the £2,000 NIC-free cap won’t take effect until 2029. Kimberley Rowbottom, HR Director, Pluxee UK.
We don’t need to ask if you watched it. UK businesses are still feeling the impact of the 2024 Autumn Budget. With predictions and speculation dominating the headlines for the last few months, we know you were glued to your screens during this year’s Autumn Budget announcement, too.
There’s much to consider, but with the year-end approaching, now is the time to review and assess to avoid decisions that could impact future resilience. While the Employment Rights Bill will drive process changes, the financial impact is undoubtedly the top concern.
The most important step is to work closely with your finance teams to understand the real impact, and then consider how your benefits, wellbeing support, and communication plans may need to flex. HR leaders should now assess the broader effects on disposable income, as this shapes employee behaviour, financial resilience and ultimately workplace engagement.
For finance leaders, these factors translate into one core question: What will this mean for your people, and how can you help them navigate it? Alexis De Maredsous, Finance Director, Pluxee UK
What the budget means for your business and workforce
Were the predictions correct, or was it all just noise? Read on as we explore the top announcements that will impact your business and workforce.
Cap on Salary-Sacrifice Pension Contributions
As anticipated, the Chancellor announced changes to the amount of salary sacrifice pension contributions that are exempt from National Insurance, with a £2,000 cap coming into effect in 2029.
Under this arrangement, employees give up a portion of their salary to put towards their pension. The employee’s NIC reduces because their take-home pay does, and employers can contribute the same amount to the employees’ pension pot instead of paying a salary, thus reducing their NIC liability.
When employers’ NIC rate increased from 13.8% to 15% in the 2024 budget, salary sacrifice schemes became a tactical solution to reducing the wage bill. The 2025 amendments will cap the amount that an employee can contribute to their pensions exempt from NIC to £2,000 per year from 2029, increasing the wage bill and removing many of the tax-saving incentives.
What does this mean for your business?
From 2029, the cost of providing employees with pension contributions via salary sacrifice will increase. Say you’re a London-based employer with 250 employees on the average London salary of £49,692. A 5% employer contribution works out as £2,484.60.
Previously, that would be a portion of your employees’ salary you’d pay towards their pension, reducing your NIC contributions by £372.69 per participating employee.
From 2029, you’ll have to pay 15% NIC on £484.60 of that contribution, costing £72.69 per employee, and reducing your previous savings to £299.79 per employee.
Strategies to alleviate the business impact
Nothing will change until 2029, so now is the time to explore all the options available. Employers can look to make cost-efficiencies, and salary sacrifice schemes remain an impactful solution. Employers can look to make cost-efficiencies, and salary sacrifice schemes remain an impactful solution, with higher ticket, Green Car schemes remain as beneficial as before. Other money-saving schemes include an Annual Leave Purchase scheme, where employees purchase additional time off, repaying via salary deductions that reduce your wage bill.
Still, it’s vital to remember that salary sacrifice schemes continue to offer employers and employees savings.
There'll be a need for cost efficiencies, but they should never be at the expense of employee wellbeing and future organisational resilience.
Before making significant changes, audit your current polices and benefits. Can savings be made there? For example, has your headcount reduced or increased since enrolling in a Private Medical scheme? Are you paying for perks that employees aren’t engaging with because they don’t meet their needs? Revisit the market to ensure the offering and spend is maximised, efficient and effective.
It’s not just perks that matter, either. Career development is a game-changer: training, mentorship, stretch projects. Recognition is crucial, too—spot awards, public praise, peer-to-peer appreciation.
Work-life enhancements like childcare support or lifestyle discounts can ease daily pressures. And don’t forget financial wellbeing—pension matching and education can build long-term security. Kimberley Rowbottom, HR Director, Pluxee UK.
Take time over the coming weeks, ahead of your 2026 budget negotiations, to assess your current employee benefits offering, to identify gaps, overlaps, or underused areas, and recommend cost-neutral improvements that boost value for employees.
2026 will likely be a year of limited pay increase since many businesses are still working hard to balance the April NIC increase, National Minimum Wage and National Living Wage increase. It’s unlikely that the median increase will increase from the 2025 rate of 3%.
With a digital employee experience platform, you can streamline your benefits offering to reduce overheads. Employees can easily see, understand, and use their non-pension benefits, increasing perceived value during uncertain times.
Employee turnover is another expense your business needs to avoid. While it's tempting to look for a new role with better pay, we’re in a climate where employees are prioritising stability and job security.
While you're calculating budget-related increases, don’t lose sight of the ‘silent revenue killers’. Disengagement, stress, absenteeism, presenteeism, and poor morale are as much a risk during times of uncertainty as your rising wage bill. Recognition ought to be a critical part of your 2026 strategy, building it into your Employee Value Proposition (EVP) to maximise cost-effective morale-boosting initiatives.
Strengthen employee engagement through impactful employee benefits that deliver value where it matters most. We help employers offer customisable, inclusive benefits that let employees choose support that matches their needs, such as wellbeing, lifestyle, health, or leisure benefits.
The role of employers in providing employees with financial wellbeing tools is vital, and we address the need for this in our Money Mastery research. Honest and transparent communication is vital. Ensure employees understand what the changes mean for them.
What’s the impact on your people?
When employees give up a portion of their take-home pay to plan for their future, they accept that they’ll have less disposable income. The payoff for this has always been that their tax and NI contributions will also reduce accordingly.
Taking the London example used above and a matching employee contribution of 5%, employees will now have to pay tax and NIC on the additional £484.60. It all comes down to salary. The higher the pay, the higher the pension contributions and tax implications.
Once in effect, employees will have a decision to make:
- Continue to set money aside for the future, putting the same amount into their pension fund at a higher price, which impacts their disposable income.
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Reduce their pension contributions to the minimum required of 3%. The employee on a salary of £49,962 will remain below the 2,000 cap, but they’d be reducing their pension contributions by nearly £1,000 each year. As for employees on an annual salary of £67,000 or more, even the basic 3% would take them over the £2,000 cap.
Strategies to alleviate the employee impact
As Kim says, efficiencies shouldn’t be at the expense of employee wellbeing, and the salary sacrifice pension changes aren’t the only changes announced in the Autumn Budget that will affect their financial health.
Support employers in reallocating savings into broader employee benefits. We can help organisations redirect budget into high-impact benefits such as everyday savings platforms, employee discounts, lifestyle spending accounts, and wellbeing programmes.
Employees need tangible benefits that deliver real value.
Tools such as employee discount schemes, grocery savings, transport savings, and prepaid everyday spending cards can help offset reduced take-home pay.
Beyond reducing the cost of living, your employees need support in becoming financially resilient, especially if they’re reducing the amount they’re setting aside for the future.
Boost financial wellbeing support by providing access to financial education, guidance, and digital resources to help employees manage their money, build resilience, and navigate the implications of benefit/tax changes. 81% of UK employees are already feeling the impact of the high cost of living and this isn’t going to ease any time soon.
Mandatory Payrolling of Benefits in Kind (BiKs)
The Autumn Budget confirmed that from April 2026, most Benefits in Kind (BiKs) perks must be reported via payroll rather than via P11D. Benefits, such as employer-provided loans, accommodation, or any benefit the employer pays in full on behalf of the employee.
Changes outlined in the 2024 Budget will soon take effect for the BiK rate on company cars, with the rate increasing to 3% for zero-emission vehicles. The percentage for other company vehicles will also increase by 1%.
What does this mean for your business?
For your business, this change will come in phases and is more about HR administration than financial pain. Although time is money, and your HR team is already stretched. However, if you offer company cars, you will face higher Class 1A NI Contributions, as the BiK will increase for many company vehicles.
Strategies to alleviate the business impact
When employee benefits like company cars or business-funded gym memberships no longer offer the same value, it’s vital to communicate the value of your complete benefits package. Employees may seek a better deal elsewhere or find the change detrimental to their income.
Enhance employee understanding of the benefits they receive. Platforms like ours consolidate benefit information in one place, so employees can easily see, understand and track the value of their benefits. Ensure they take full advantage of discounts and cashback to reduce the cost of everyday living and balance out any increases.
Identify, communicate and educate employees about those 'forgotten benefits', ensuring they can utilise every perk and policy to maximise the value of your total offering, providing essential support from the solutions already available. Kimberley Rowbottom, HR Director, Pluxee UK
What’s the impact on your people?
The BiK changes will lead to higher tax bills for company car users, especially for EVs, making running a company car more expensive than before. This money-saving perk may no longer offer the same value it once did.
Strategies to alleviate the people impact
It’s vital that your employees make the most of all the benefits you offer them, especially if you’re providing a suite of financial wellbeing solutions.
Increase in Employer National Insurance Contributions (NICs)
The Autumn Budget confirmed that there will be no additional increases in employers' NI contributions since the April 2025 increase from 13.5 - 15%.
The secondary threshold (when NI becomes payable) also remains unchanged, reducing from £9,100 to £5,000 as per the 2024 announcement. Meanwhile, the Employment Allowance (which offsets some employer NIC liability) is increasing from £5,000 to £10,500, and the eligibility cap (£100,000) is being removed
What does this mean for your business?
Rates aren’t increasing, which is great news. Still, the April increase in Employer NI Contributions has increased payroll for many businesses, impacting cash flow, hiring, and wage planning. Smaller employers may benefit more from the expanded employment allowance, but larger ones are feeling the pinch.
Reduced cash flow may affect your ability to increase wages or optimise employee benefits packages. However, as Kim suggests, you should consider the impact on employee wellbeing and business sustainability before making any cost-efficiencies.
Your employees are also feeling the impact, and their personal situations will reflect in their workplace performance. A lack of support could also lead to high employee turnover, which could cost your business far more than investing in employee benefits would.
Strategies to alleviate the business impact
Salary sacrifice schemes remain a viable option for reducing your NIC bill, so it’s worth investing in a platform that includes a suite of salary sacrifice solutions, including Green Cars, Cycle to Work, and an Annual Leave Purchase scheme.
What’s the impact on your people?
In 2025, the pay increase sat at a median of 3%, which is 1.5% lower than in previous years. In many cases, pay increases aren’t keeping pace with inflation, preventing your employees from living well today and saving for tomorrow.
Strategies to alleviate the people impact
Your employees' take-home pay may reduce at a time when the cost of living continues to rise. Let’s not forget that our retail industry is also facing operational cost increases, which they may likely pass on to consumers.
Whatever way you look at it, the maths isn’t in favour of your employees, and it can lead to a cycle of debt. We offer two salary deduction schemes that can help: SmartPay and Refurbished Tech.
SmartPay is ideal for when something expensive breaks at home and your employees don’t have the funds to replace it outright. Credit cards and loans come with interest, which can perpetuate debt. SmartPay allows employees to spread the cost of a new washing machine, bed, or sofa via salary-deduction repayments: no credit, no debt, no interest.
Refurbished Tech has every gadget covered and offers repair services. Greener tech that’s more affordable, can be repaid over a period of time without incurring interest, and it’s great for the planet. Employees don’t even need to purchase anything; they can sell their unwanted gadgets at a great price to earn extra cash when needed.
As salary deduction products, these financial wellbeing solutions are cost-neutral for your business.
NIC, Personal Tax and Income Tax remain frozen
The Chancellor announced that NIC, Personal Tax and Income Tax thresholds will remain frozen. Personal allowance will remain at £12,570 until 2028, and the threshold at which the higher tax rate (40%) will remain at £50,270.
Since the threshold won’t rise with inflation or wage growth, when you raise an employee’s salary, they’re more likely to move into a higher tax bracket, reducing the impact of the increase, causing fiscal drag.
What does this mean for your business and people?
In this case, the impact on your business will be fuelled by the impact on your people. Your employees' take-home pay will decrease, and the effect varies depending on each employee’s tax bracket.
When employees’ finances take a hit, they’re likely to reevaluate their options, potentially looking for a higher salary elsewhere. In some cases, this may not be the best solution, should an increase take them into a higher bracket.
Financial stress could feed into your business, negatively affecting employee wellbeing, reducing productivity and increasing an already astronomical national annual absenteeism bill.
Strategies to alleviate the business and people impact
Assess the impact on a per-salary bracket basis to understand its effect across the different levels within your business. From there, you could bring in financial advisers or educators to help employees understand how to alleviate the impact.
This additional change to your employees’ salaries could have a significant effect, which is why caution ought to come before cost-efficiencies on a business level. It’s vital to explore cost-effective ways to enhance the financial value of your overall Employee Value Proposition (EVP) to maximise monetary value for your workforce, in a way that’s sustainable for your business.
National Living Wage & Minimum Wage Increase
In the 2024 Budget increase, the minimum wage for people 21 and rose by 6.7% to £12.21 an hour, and the minimum wage for those aged 18 to 20 increased by 16.3% to £10 an hour.
The 2025 Budget announced further increase, effective from 1st April 2026. The National Minimum Wage for 18 – 20-year-olds will increase to £10.85, and the National Living Wage will rise from £12.21 to £12.71.
How will the increase impact your business?
The cost of employing younger people will rise, and the wage bill will once again increase for employers with a larger number of employees on a minimum wage. What’s also important to remember, is that when lower wages increase, it closes the gap between existing salary brackets, causing wider wage reviews within your business.
While the cost of employment will rise, these increases aren’t entirely negative. Your employees will likely have more disposable income leading to a better quality of life and more financial resilience.
Strategies to reduce the business impact of wage increases
Salary sacrifice schemes remain a valuable strategy for reducing payroll overheads, and those opportunities look set to remain untouched for a few more years.
Perhaps the most significant challenge will come from the wider implications and the potential need to maintain a gap between the salary brackets within your business. Pay increase negotiations in 2026 may be challenging, so taking Kim’s advice on communicating the total value of your benefits offering will be essential.
Balance wellbeing and cost-efficiencies to strengthen resilience with Pluxee UK
We’re the employee engagement and experience partner, committed to navigating the budget by your side, to ensure your employees receive the support they need to thrive and your business remains in the green.
Over the coming weeks, we’ll share further guidance on how to ensure you can find the perfect balance between wellbeing, cost-efficiencies and resilience.
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Learn more about the Autumn budget 2025 or dive dive into what the budget means for HR leaders.
