What the employment law reforms in the Autumn Budget 2025 mean for employers

The Autumn 2025 Budget and the Employment Rights Bill introduce significant changes to employment law in the UK.

These reforms aim to enhance workplace protections, improve transparency and fairness for workers, and tighten employer expectations. However, employers should begin preparing now for the legal and financial implications.

Key employment law reforms 

National Living Wage Increase – From April 2026, the National Living Wage will rise to £12.71 per hour. Employers, particularly those in retail, hospitality, and social care, should budget for increased payroll costs and consider reviewing pay structures to maintain internal parity and competitiveness.

Salary-Sacrifice Pension Contributions – Only the first £2,000 of salary-sacrifice pension contributions will be exempt from National Insurance. This change reduces the NI savings currently available to both employers and employees. Employers may need to revise pension communications and assess whether existing schemes remain cost-effective.

Apprenticeship Funding – A new funding package aims to expand access to apprenticeships. This presents an opportunity for employers to strengthen workforce development, though details of eligibility and administrative requirements will need careful monitoring.

Fair Work Agency– The Employment Rights Bill will introduce the Fair Work Agency, consolidating several enforcement bodies and expanding investigatory powers. Employers should expect more proactive enforcement on issues such as minimum wage compliance and worker classification. Robust HR and payroll auditing will become increasingly important.

Enhanced Maternity Protection – Proposed strengthened protections for pregnant employees and new mothers may require updates to policies, manager training, and risk assessments to ensure compliance and minimise discrimination risks.

Trade Union Access – New rights for trade unions to access workplaces, coupled with a duty to inform workers of their right to join a union, will require employers to adjust both communications and engagement strategies.

Digital HR1 Forms – From December 2025, HR1 forms (mandatory advance notification of collective redundancies) must be submitted online with expanded information requirements. Employers planning restructures or redundancies should familiarise themselves early with the new digital format.

Next Steps for Employers

Collectively, these reforms reflect a clear shift toward enhanced worker protections and more active regulatory oversight. Employers who begin preparing now will be better placed to manage increased employment costs, adapt to new obligations, and foster constructive workforce relationships.

In practical terms, organisations should start by reviewing their pay structures and financial planning to accommodate the National Living Wage increase due in 2026. Salary-sacrifice arrangements will need careful auditing, with updated employee communications to reflect the reduced National Insurance exemption. Employers may also wish to explore how the new apprenticeship funding package can support skills development and workforce planning.

At the same time, HR governance and compliance processes should be strengthened in anticipation of the Fair Work Agency’s expanded enforcement powers. Policies relating to pregnancy and maternity will require updates, alongside appropriate manager training and risk assessments. Employers should also prepare for a more structured relationship with trade unions, ensuring communication practices align with the new duty to inform workers of their rights. Finally, HR teams should familiarise themselves with the forthcoming online-only HR1 system ahead of its introduction in December 2025.

Taking these steps proactively will help organisations navigate the evolving legal landscape with confidence and minimise compliance risks in the years ahead.

Alex Kiernan