"Keep a watchful eye if the Chancellor caps or scraps salary sacrifice for pensions, because the impact will be significant for both employers and employees. If NIC exemptions are limited to £2,000 - employers lose a key cost-control tool, and both employees and employers face higher National Insurance contributions. This could increase payroll complexity. SMEs should also watch for any further uplift in the National Minimum Wage. If announced, it will mean higher wage bills and a compliance challenge for sectors like retail and hospitality."
"If so, fiscal drag (described as a stealth tax) might lead to more employees being pushed into higher tax bands, which could result in increased payroll complexity and generate more employee queries. Any new compliance measures could add significant complexity to an already challenging landscape. Between potential Budget changes, upcoming Employment Rights Bill reforms, and the Fair Work Agency launch in 2026, HR and payroll teams need to plan ahead now."
Capping or scrapping pension salary sacrifice and limiting NIC exemptions to £2,000 will remove a key employer cost-control tool and raise National Insurance costs for both parties. Potential uplifts in the National Minimum Wage will increase wage bills and create compliance challenges, especially in retail and hospitality. A continued freeze on personal tax thresholds through 2030 could cause fiscal drag, pushing more employees into higher tax bands and generating additional payroll queries. Upcoming Budget, Employment Rights Bill reforms, and the Fair Work Agency launch require proactive HR and payroll planning to avoid significant operational and compliance risks.
#salary-sacrifice #national-insurance #national-minimum-wage #payroll-complexity #employment-compliance
Read at London Business News | Londonlovesbusiness.com
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