The Employment Law Implications of the Autumn 2026 Budget

The Employment Law Implications of the Autumn 2026 Budget | Wednesday 11 November 2026 | 3 min read

The Chancellor delivered the Autumn Budget 2026 on Wednesday 28 October, introducing several measures that will affect employers and workers over the coming years.

Below, we explore the key employment-related announcements and what they mean for UK employers.

1. National Minimum and National Living Wage increases 

The most significant announcement for employers is the increase to the National Minimum Wage and National Living Wage rates from 1 April 2027. The Government has accepted the recommendations of the Low Pay Commission in full, resulting in a 3.9% increase across all statutory pay rates.

Notably, the Government did not further narrow the gap between the 18–20 rate and the National Living Wage, despite its manifesto pledge to equalise the two.

The new rates are as follows:

• National Living Wage (21+) – £13.21/ per hour
• 18–20-year-olds – £11.27/ per hour
• 16–17-year-olds and eligible apprentices – £8.31/ per hour
• Accommodation offset – £11.53/ day

For employers operating in sectors with large numbers of lower-paid workers, such as retail, hospitality, care and leisure, these increases are likely to have a significant impact on payroll costs.

The Budget serves as a timely reminder for employers to review compliance with National Minimum Wage obligations. Wage increases frequently expose existing compliance issues, particularly where employers operate salary sacrifice arrangements, require staff to purchase uniforms or equipment, or fail to account properly for working time.

2. National Insurance Threshold Freeze Continues

Although the Budget did not introduce an increase in employer National Insurance contribution rates, it confirmed that most National Insurance thresholds will remain frozen until 2030-31.

In practice, this means that as wages increase, employers may face higher National Insurance costs through “fiscal drag”, even though contribution rates themselves remain unchanged. Combined with the forthcoming wage increases, this is likely to increase overall employment costs for many businesses.

3. Non-Compete Clauses Under Review

The Government has also confirmed its intention to legislate to prevent non-compete clauses from acting as barriers to recruitment and growth. A wider consultation on restrictive covenants is expected, with further details anticipated in early 2027.

While no immediate changes have been implemented, employers that rely heavily on post-termination restrictions may wish to monitor developments closely.

4. New Parental Allowance for Self-Employed Workers

Looking further ahead, the Government has announced plans for a new Parental Allowance, due to take effect in April 2029. The allowance is intended to extend parental pay support to eligible self-employed fathers, partners and adopters, as well as individuals with irregular work histories who currently fall outside existing entitlement frameworks.

Detailed eligibility criteria are yet to be published.

Looking Ahead

The Autumn Budget 2026 does not introduce an overhaul of employment law, but it does increase labour costs for many organisations.

Employers should take the opportunity to review payroll budgets, prepare for the April 2027 wage increases, audit National Minimum Wage compliance and monitor developments regarding restrictive covenants and wider Employment Rights Act reforms.

For advice on how these changes could affect your business, please contact our Employment Team.