The 2025 Autumn Budget (delivered on 26 November) brings a mix of tax, employment-cost, and public-spending measures that matter for recruitment agencies, whether you specialise in permanent roles, temp/contract staffing, or outsourced workforce solutions.
Here’s a breakdown of the key changes and what they could mean for your business.
Key changes with direct impact on employment, pay, and contractor costs
Frozen tax thresholds & “fiscal drag”
The Budget extends the freeze on income tax and National Insurance thresholds until 2030–31.
- As wages rise, more workers will be pulled into higher tax/NI bands.
- This reduces take-home pay unless employers raise salaries — something that may influence wage negotiations in both perm and temp markets.
- Expect increased sensitivity around pay, particularly in lower-wage sectors.
Salary-sacrifice pension schemes restricted
From April 2029, salary-sacrificed pension contributions above £2,000 per year will no longer be exempt from National Insurance.
- This reduces the financial advantage of salary-sacrifice pensions, potentially making benefits packages less attractive.
- For recruitment businesses operating PAYE or umbrella models, this will push up employer NIC costs and may require adjustments to rate cards, margins, or client pricing.
Higher staffing costs via minimum wage and employer cost pressures
With the minimum wage rising and operating costs increasing for employers, agencies should expect:
- Clients pushing back on costs but also needing to adjust pay rates.
- Candidates expecting higher salaries to maintain living standards.
- Temp and contract bill rates needing review to ensure margins are protected.
How demand and hiring patterns may shift
Increased opportunities in public-sector and skills-focused areas
The Budget commits funding to health, education, skills, and apprenticeships.
- Agencies supplying the public sector may see upticks in demand.
- Apprenticeship and early-career recruitment could grow as new programmes receive funding.
- Interim and contract staffing may be used to fill capability gaps while organisations navigate budget cycles.
Private-sector investment softening — potential slowdown in perm hiring
Forecasts suggest business investment could tighten in 2026.
- Permanent hiring in SMEs, tech, scale-ups and growth sectors may soften.
- Agencies may benefit from strengthening their contract/interim offerings to offset any dip in permanent placements.
- Diversification into resilient sectors (healthcare, education, essential services) may give stability during investment lulls.
What recruitment agencies should do now
- Review rate cards and margin models to ensure increased NIC and wage costs are accounted for.
- Communicate early with clients about cost pressures and upcoming changes — especially long-term contract users.
- Upskill your BD teams to position flexible staffing solutions where employers may be cautious about permanent commitments.
- Watch pension-benefit changes closely, especially for high-volume temp payroll, where salary sacrifice has been widely used.
- Lean into growth sectors where government investment may drive demand for new hires or additional workforce support.
Big picture — What this Budget signals for recruitment firms
The Budget introduces cost pressures but also creates opportunity. Employment and payroll costs will rise, but government-funded programmes and public-sector growth may open new business streams.
Recruitment companies that adapt pricing, diversify services, and target resilient sectors will be best placed to thrive.
Want a deeper breakdown of what the Budget means for your agency?
We recently hosted a webinar walking through the implications for recruitment business owners. Watch the webinar playback here;