Budget 2025 and National Insurance: key watch points for employers

With the November 2025 Budget looming, UK employers are watching closely for possible changes that could directly impact employment costs.

Following significant National Insurance Contribution (NIC) reforms for employees in 2024–25, including the phased reduction of employee NIC rates, many expect the autumn Budget to focus on employer NIC rates, training incentives or hiring support mechanisms as part of a wider economic stimulus package.

Add to this a rising number of Employment Tribunal claims and the risks to organisations are significant. Employers must prepare now for potentially sharp shifts in both their financial liabilities and compliance responsibilities going into 2026.

Where we are now: the NIC landscape 

So far, employer NIC rates have remained stable despite reductions to employee contributions introduced in 2024. Current employer NIC stands at 13.8% above the secondary threshold, with some exemptions for apprentices, under-21s, and those in Freeports.

However:

• Political pressure to reduce employment costs could lead to rate changes or threshold realignments.
• Incentives for upskilling or hiring may be introduced, especially for sectors experiencing labour shortages.
• A rebalancing of NIC reliefs could encourage wage growth or regional employment.

These moves would support the Government’s economic growth agenda but may create short-term budgeting volatility for employers.

The broader cost risk: employment law reform and rising tribunal exposure

While tax adjustments are one lever, the Employment Rights Bill, expected  to come into force within weeks, introduces significant new obligations for employers from Autumn 2026 through to 2027.

Combined with:

• New statutory rights (bereavement leave, day 1 rights to claim unfair dismissal)
• Harassment prevention duties under the Worker Protection (Amendment of Equality Act 2010) Act 2023
• Expanded scrutiny of fire-and-rehire practices
• Rising claim trends in discrimination, unfair dismissal, and contractual disputes

…it’s no surprise that Tribunal claims have surged. According to recent Ministry of Justice data, the claims backlog has increased by 23% year-on-year, and the upcoming legal changes are likely to drive this higher.

Compensation awards for unfair dismissal or harassment can exceed £100,000 in high-profile or mishandled cases.

Employer planning strategies

To stay ahead of both fiscal change and employment law reform, consider the following proactive steps:

1. Run NIC contingency models now
2. Prepare for hiring and training incentives
3. Align budgeting with legal risk
4. Review headcount strategy for 2026

What to watch in the Autumn 2025 Budget:

• Employer NIC rate or threshold adjustments
• Expansion of NIC relief for apprenticeships or SMEs
• Funding for regional employment zones or reskilling initiatives
• Clarity on tax treatment of redundancy packages or sick pay

Join us to get ahead 

To help employers prepare, we’re hosting a live webinar this September:

The future of employment and employment law webinar – register here.

Please get in touch with our Employment Law team if you have any questions or need help understanding what it means for your business.