The budget included a rise in the national minimum and living wage, increases in employers’ national insurance and pension contributions, and a higher threshold for carers' allowance.
Reeves also said that she would invest in childcare and education.
We asked HR how the announcements would affect employers.
National insurance and tax
Reeves confirmed that she would increase employers’ national insurance contributions (NICs) by 1.2%, to 15% from April 2025. The threshold at which employers will have to start paying NIC will drop from £9,100 to £5,000, to raise £25 billion a year.
The increase would likely affect employers’ recruitment strategies, Chris Elridge, CEO of recruitment firm Robert Walters UK and Ireland, told HR magazine.
“This Budget addresses one of the main issues businesses have faced this year: uncertainty,” he said.
“Generally speaking, we saw hiring put on hold to wait for today’s outcome, and it’s fair to say the Budget offered up a mixed bag for UK employers. The increase in NICs will be a blow for all employers, particularly SMEs, who are less able to absorb costs compared to large firms.
“Decisions will have to be made to help offset any rising costs, including the likes of reducing hiring, freezing wages or limiting pay rises.”
There will be no changes to employees’ NICs, and income tax brackets will only be frozen until 2028. “When it comes to choices on tax, this government chooses to protect working people every single time,” Reeves said.
The tax bracket freeze will inevitably impact working people, however, according to Melanie Pizzey, CEO and founder of the Global Payroll Association.
Speaking to HR magazine, she said: “The government may claim to have kept its pledge not to directly increase taxes for working people, however, the decision to maintain the freeze on tax thresholds is, in effect, the same as increasing the rate of tax.
“The continued fiscal drag due to these measures will pull more workers into higher tax brackets and, when combined with other existing legislation, will create severe cliffs for some working families.
“Of course, the impact of fiscal drag could well be minimised should workers fail to see their earnings increase in the first place. This is a very real possibility given the fact that businesses have been hit with an increase in the national living wage and NICs, although there will be exemptions for small businesses.”
Despite the changes bringing unwelcome consequences, employers' confidence would gradually improve, Elridge predicted.
He continued: “While the increased tax burden on some businesses will be an unpopular move, we anticipate that, due to the clarity that naturally comes post-Budget, confidence levels will gradually improve."
Read more: Spring Budget 2024: what HR wants
The employment allowance is set to increase in April 2025 from £5,000 to £10,500, meaning that 65,000 of the UK's smallest employers won’t have to pay NICs next year, and more than a million will pay the same, or less, than they did previously.
This is part of the government’s attempt to protect small businesses from the impact of the increase. “I know it is particularly important to protect our smallest companies,” Reeves commented.
Reeves announced that she would introduce national insurance for employers’ contributions towards employees’ pensions. Employers do not currently pay national insurance for their contributions to employee pensions.
Minimum wage
Reeves confirmed that there would be an increase in the national living wage and minimum wage in April 2025. The hourly national living wage for people aged 21 and over will rise by 6.7%, to £12.21 per hour, up from the current rate of £11.44.
The minimum wage is also set to increase from £8.60 to £10 for 18 to 20 year olds, and apprentices are to be paid £7.55 an hour, up from £6.40.
"This rise in the national minimum wage will be welcomed by many employees, will bring in more people into pension savings and will boost the amounts being saved," commented Ben Willmott, head of public policy at the CIPD. "However, many businesses may struggle to absorb the increase and could end up passing this on through higher prices, accepting lower profits or cutting headcount."
Melissa Blisset, gender pay gap analytics lead at independent professional services consultancy Barnett Waddingham, explained that the changes could help close the gender pay gap.
She commented: "The increase in the national minimum wage will certainly help lower-paid women and potentially help reduce an organisation's gender pay gap, if more women are in these lower-paid roles. Employers could go further and commit to the Living Wage Foundation's real living wage of currently £12.60 per hour or £13.85 in London."
Reeves, who is the UK's first female chancellor, said in her speech: "I am deeply proud to be Britain’s first ever female Chancellor of the Exchequer. Along with the pride that I feel standing here today there is also a responsibility to pass on a fairer society and a stronger economy to the next generation of women."
Pensions
The state pension will increase by 4.1% in April 2025, Reeves confirmed, in line with the triple lock.
The flat-rate state pension, for those who reached state pension age after April 2016, is expected to increase by £473 a year, to £11,975. The basic pension rate for people who reached the state pension age before April 2016 is due to increase by £361 a year, to £9,175.
Meanwhile, the pension credit standard minimum guarantee is to increase by £465 in 2025-26 for single pensioners and £710 for couples.
Childcare
The chancellor announced a series of investments into childcare, including £1.8 billion for expanding government-funded nursery care in the next financial year and £15 million for school-based nurseries.
Reeves also said that she would triple investment in free breakfast clubs to £30 million in 2025-26.
Read more: Why childcare needs to become an employer priority
Amelia Miller, co-founder of Ivee, a return-to-work platform for women, welcomed the investment but suggested that it did not go far enough to support working parents.
Speaking to HR magazine, she said: “The increase in school spending and the tripling of investment into breakfast clubs are steps in the right direction. But the budget still leaves working parents, especially those with young children, without the nursery places they need.
“With £1.8 billion allocated next year for nursery care expansion, we need this funding to go directly towards accessible, high-quality childcare options for families. I am keenly watching what the minister for education does with this money."
Benefits and carers
The amount received in benefits will increase by 1.7% in April, in line with inflation.
Meanwhile, the carer’s allowance maximum earnings threshold will rise from £151 to £195 a week – the largest increase since it was introduced, Reeves noted. This would make more than 60,000 carers eligible for support.
She also introduced a weekly earnings limit to 16 hours per week, “allowing carers to increase their hours where they want to, and keep more of their money”.
Miller added that the changes would not be enough to keep older workers in work.
She continued: “The rise in the carer’s allowance threshold is great news, enabling more caregivers to balance part-time work with essential support for family members.
“However, in light of the UK’s having lowest fertility rate in history (1.44 children per woman), alongside an ageing population, more comprehensive policies are needed to attract older workers back into meaningful employment, which this budget did not address.
"Employers can help fill this gap by prioritising flexible work options and investing in family-friendly initiatives that align with the evolving needs of working parents. These steps are essential for supporting employees managing dual roles as parents and caregivers, which in turn will support Britain’s productivity goals.”
The government plans to review health and disability benefits, and introduce a Get Britain Working white paper, aiming to examine the root causes of economic inactivity.
Reeves committed £240 million for health and employment services targeted at people who are economically inactive and not in education, employment or training.
Skills
The government announced in its manifesto the creation of Skills England, which will ensure a “highly-trained workforce”. This will be implemented alongside the Get Britain Working Plan, which is set to unite national and local organisations to improve employment rates and skills.
Reeves allocated £300 million for further education and £6.7 billion for education investment next year.
At the Labour Party conference in September, the government announced £40 million to deliver foundation and shorter apprenticeships.