| Scope note. This article refers to tax, National Insurance, minimum wage and employment law. These are context for hiring planning, not tax, legal or financial advice. For your organisation’s position, speak to a qualified accountant or employment specialist. |
Every Budget week looks the same inside a UK SME. A junior requisition that has sat in the approvals folder since September gets one more week of “let’s see what the Chancellor says.” Nobody is being careless. A hire is a multi-year cost, and the numbers feel as if they are about to move.
John Healey delivered his first Budget today, 28 October 2026, under Prime Minister Andy Burnham. For UK SMEs weighing their next hire, the headline is that pay goes up again from April 2027, employer National Insurance did not go down, and there is new apprentice money for young hires. Here is what each of those means in practice, and what to decide in the next 30 days.
The main change for hiring is the April 2027 pay floor, not National Insurance. The Chancellor confirmed that the National Minimum Wage and National Living Wage will both rise by 3.9% from April 2027 for about 2.3 million workers. The adult rate (21 and over) goes to £13.21 an hour, the 18 to 20 rate to £11.27, and the 16 to 17 and apprentice rate to £8.31. Budget live coverage confirms the first two figures from the Chancellor’s own tweet; the apprentice rate is from People Management’s Budget write-up.
On employers’ costs, Personnel Today’s read is blunt: “no breathing space on employment taxes.” There was no cut to the 15% employer National Insurance rate, no change to the £5,000 secondary threshold, and no youth National Insurance holiday. The CBI’s pre-Budget ask of a £6,000 threshold and the Conservatives’ pitch to halve employer NI for 21 to 24 year olds were both set aside. The current rates stand.
Alongside the pay rates, the Chancellor announced a £100m pot for youth apprenticeships, a trading allowance rise from £1,000 to £3,000, and a new Young Entrepreneurs Allowance covering a year of living costs for young founders, according to People Management’s Budget write-up. People Management also notes that the Budget signalled wage transparency rules, non-compete reform and immigration changes. These are secondary to hiring cost today, but worth tracking as the detail lands.
| Item | Before the Budget | After today |
| Employer NI rate | 15% above £5,000 a year | Unchanged |
| Employment Allowance | £10,500 a year | Unchanged |
| Employer NI, under 21 and apprentices under 25 | 0% up to £50,270 | Unchanged |
| National Living Wage (21 and over) | £12.71 an hour | £13.21 from April 2027 (3.9%) |
| 18 to 20 rate | £10.85 an hour | £11.27 from April 2027 (3.9%) |
| 16 to 17 and apprentice rate | £8.00 an hour | £8.31 from April 2027 (3.9%) |
| SME incentive, 16 to 24 apprentices | £2,000 from October 2026 | Unchanged; new £100m apprenticeship pot |
Yes, because today’s Budget kept youth pay rates lower than the adult rate, and because employer costs on under-21s and apprentices are already lower than on an adult hire. Labour had committed to equalising rates, but the Chancellor paused that path. Youth pay still rose, by the same 3.9% as the adult rate, so the gap between the adult rate (£13.21) and the 18 to 20 rate (£11.27) stays at £1.94 an hour.
There is new money on top. The Chancellor announced £100m for youth apprenticeships, according to People Management, as part of a push against the Neets crisis. That sits alongside the existing Department for Education £2,000 incentive for non-levy employers taking on a 16 to 24 year old apprentice, paid in two instalments at day 90 and day 365, and the £3,000 Universal Credit hiring incentive for some 18 to 24 year olds. The DfE page also confirms there is no employer National Insurance on apprentices under 25.
Supply is shifting as well. A Work Foundation survey of 1,001 businesses, reported by Reuters, found that 36% of UK employers had cut entry-level roles in the past year, ranging from 24% of small firms to 48% of medium firms. If you kept junior roles open while larger employers cut, I would expect more applicants per role. That is my reading, not a survey finding. It makes screening quality the real bottleneck, which I covered in Too Many Job Applicants. For the wider mistakes SMEs make with junior roles, see Entry Level Hiring UK.
At £13.21 an hour for the adult rate, a full-time 21 year old will cost about £28,733 a year, before pension and after any Employment Allowance. Here is the sum for a 37.5 hour week over 52 weeks. The adult rate gives annual pay of about £25,760. Employer National Insurance at 15% on earnings above £5,000 adds about £3,114, so the total is roughly £28,874 before pension. The Chancellor rounded his figures to a 40 hour example of about £27,500 a year in pay, so your actual bill depends on contracted hours.
For a full-time 20 year old, the April 2027 pay would be £11.27 an hour, about £21,977 a year, with no employer National Insurance up to £50,270. That is a gap of about £6,900 a year before pension, roughly the same as this year. The Employment Allowance may offset some or all of the National Insurance for eligible employers, so ask your accountant what it means for your actual bill.
For an apprentice at £8.31, annual pay is about £16,205 for the same hours. There is no employer National Insurance under 25. Add the £2,000 DfE incentive in two parts, and the first-year cash cost may be lower, though it arrives after the start.
Two dates matter: tribunal claims now have a six-month window, and from 1 January 2027 the unfair dismissal qualifying period drops to six months. Acas confirms that the tribunal time limit rose from three to six months on 1 October 2026, with the old limit possibly still applying to problems that began earlier. Law-firm guidance confirms that the unfair dismissal qualifying period drops to six months from 1 January 2027. Today’s Budget did not change either date.
For hiring, the effect is timing. Someone who starts this autumn reaches six months of service early in the new year, which is sooner than many SMEs schedule a first formal review. Put a probation review in the diary for every new starter now. Probation Period Changes UK covers this in more depth. This is context, not legal advice, so ask a qualified employment specialist how it applies to your contracts.
Yes, because the April 2027 pay rise squeezes the gap between your newest starter and your most experienced junior. When a new hire starts on £13.21 and someone with two years of service earns £13.50, that gap becomes a fairness question inside the team. It is a pay-differential question to answer before April 2027, not after the first person leaves. Walk the pay bands between juniors and the next step up, and plan the April 2027 uplifts in the same conversation.
Churn costs more now too. If a young hire costs less to bring in but leaves within a year, you pay for recruitment, onboarding and lost output twice. My post on new hire attrition for UK SMEs sets out how to break that cycle. So when you cost a 2027 hire, add one more line to the sum: what keeps this person for two years? A buddy, a clear first-90-day plan and a visible next step are low-cost answers, and none of them depend on today’s Budget.
Automate the repetitive hiring steps first, and keep a named person genuinely deciding who is hired. The Budget confirmed that employer costs are not getting easier. With pay rising 3.9% in April 2027 and no cut to National Insurance, the cheapest capacity you can release is process time. Five steps usually repay the effort:
Anything that scores or ranks candidates needs a human who can change the outcome before it takes effect. I cover the screening side in Too Many Job Applicants, and when to use an agency rather than build this in-house in Recruitment Agency Fees UK. The Budget’s message to employers is to find the capacity you need from inside your own process, not to wait for cheaper staff. If you can release ten hours of hiring time a month, you may not need to hire the coordinator you were about to cost.
Make five decisions before the end of November.
If you want the longer view, my post on the six-month window for UK SME hiring sets out why the next two quarters matter. Today’s Budget confirmed the pressure, it did not relieve it. Stop waiting for a better announcement. Cost the hire, check the support, and decide.
For most UK SMEs, the main hiring-related change is the April 2027 pay floor. The adult National Living Wage rises 3.9% to £13.21, the 18 to 20 rate to £11.27, and the apprentice rate to £8.31. The Chancellor did not cut employer National Insurance or raise the £5,000 threshold.
No. Employer National Insurance stays at 15% on earnings above £5,000 a year, and the under-21 and apprentice-under-25 relief up to £50,270 is unchanged.
The adult rate (21 and over) will be £13.21 an hour, confirmed by the Chancellor on 28 October 2026. The 18 to 20 rate will be £11.27, and the 16 to 17 and apprentice rate £8.31. All three rise 3.9% from April 2026 levels.
Yes. The Department for Education lists a £2,000 incentive for non-levy employers taking on 16 to 24 year old apprentices from October 2026, plus a £3,000 Universal Credit hiring incentive for some 18 to 24 year olds. The Chancellor also announced a new £100m apprenticeship pot. Check eligibility on the DfE page.
A freeze does not move the 1 January 2027 employment law date or the DfE incentive, and the Chancellor has now confirmed the April 2027 pay rates, so waiting rarely removes the need to plan. Cost each role at the new rates, then decide role by role.
| Sabiha is a UK talent acquisition director with 16 years of hiring experience across the UK, Dubai, South Africa and Malaysia. She helps UK SMEs design hiring and retention systems that use AI responsibly. Her first book, on using AI to win and keep talent in UK workplaces, is published Autumn 2026 with Trotman. |
Global Talent. Ethical AI. Strategic Hiring. Sustainable Retention.
