How does the Autumn Budget affect affect low-paid workers?
Labour have announced their first budget and key policies will impact millions of hourly-paid workers across the country.
Chancellor Rachel Reeves has announced her first budget for the labour government and Founder and CEO of WAC, Georgina Fairhall, breaks down the key changes affecting hourly-paid workers.
What is the UK budget?
The Budget, or Financial Statement, is a statement made to the House of Commons by the Chancellor of the Exchequer on the nation’s finances and the Government’s proposals for changes to taxation.
Which policies will affect hourly-paid workers?
There are 12 million workers paid by the hour in the UK across all age groups, and we’ve rounded up the top policies which could impact you.
National minimum wage to rise 6.7%
From 1 April 2025, the national minimum wage will increase by 6.7% for all workers aged 21 and over to £12.21, which should impact over three million workers.
Workers aged between 18 and 21 will benefit from a wage increase of 16.3%, whereas apprentices and under 18s will receive an increase of 18%. Earlier this year, the Government announced plans to make the minimum wage the same for all age groups and has begun to narrow the gap by increasing the minimum wage by a larger percentage for those under the age of 21.
However, the increase will still fall below the ‘national living wage’ which is set by the National Living Wage Foundation which has confirmed that employers who are part of the scheme should pay employees £12.60 per hour.
Fairhall commented “An increase in minimum pay regardless of age group will create a level playing field when it comes to hourly-paid workers and ensure everyone is paid the same for the same job regardless of age. Raising the minimum wage across all age groups will help level the playing field for hourly-paid workers, ensuring equal pay for equal work, regardless of age. However, this change may strain businesses already facing rising costs. As a result, it could lead to fewer opportunities for less experienced workers, while increased financial pressure may trickle down to employees, potentially causing heavier workloads, greater stress, and more frequent payroll misses.”
Public transport costs to increase
Alongside an increase in the national minimum wage, public transport is also set to increase. The Chancellor has confirmed that regulated rail fares in England will increase by 4.6% and the price of most Railcards will increase by £5 from 2 March 2025. Regulated rail fares include season, anytime day, off-peak, and super off-peak tickets.
From 1 January 2025, the bus fare cap will increase from £2 to £3 and has been extended till the end of 2025. Despite the increase it has been confirmed the cap will remain at £2 in Manchester for single-fare journeys.
Fairhall commented “The overall increase in public transport costs will heavily impact hourly-paid workers who are required to commute to work every day, particularly those in retail, hospitality and the NHS. This means the increase in the National Minimum Wage might not have a noticeable effect on the pockets of low-paid workers. However, it’s reassuring to see thriving cities like Manchester keeping the cap at £2 to benefit commuters, hopefully, more Northern cities will follow suit.”
State Pension to rise by 4.1%
On 6 April 2025, the old and new State Pensions are due to rise by 4.1% under the triple lock guarantee, ensuring the state pension will not lose value in real terms. Those aged 65+ are the second most likely age bracket to be in hourly paid work, and most pensions (three in four) are on the Old State Pension, meaning they will receive a smaller increase.
Fairhall commented, “Those aged 65+ are already the second most likely to work zero-hours contracts, and with the proposed changes to pensions, it’s concerning to think many more pensioners may be forced to take on more hourly paid work or return to work just to make ends meet, further complicating their retirement.”
Benefits to rise by 1.7%
From April 2025, benefits such as Universal Credit and Child benefit will increase by 1.7%. Alongside this increase, there will be fundamental changes to Universal credit, such as monthly deductions to be reduced from 25% to 15% if claimants owe money for debts including rent, council tax, utility bills and advances in benefit payments. In addition, reform to work capability assessment will continue which means around 500,000 Universal Credit claimants may be required to complete more work-related activities due to no longer being classed as having “limited capability for work.”
Fairhall commented “Changes to to benefit system are cautious, and those in debt could see an annual increase of up to £240 with the reduction of monthly deductions from their Universal credit. However, the increase in benefits won’t outweigh the rising transport costs to come over the next year.”
Employers will pay more National Insurance
The rate at which employers pay National Insurance will increase from 13.8% to 15%, and they will begin to pay this for employees who earn over £5,000 a year.
Fairhall commented “An increase to employer National Insurance contributions means businesses will need to factor in additional costs which could heavily impact smaller British businesses who are unable to keep up with rising costs. This could also leave industries understaffed to cut costs, which will disproportionately impact those in hourly-paid work, leaving them overworked and undervalued.”
WAC is the #1 app empowering hourly-paid workers to track their hours and feel good about money. They’ve helped thousands of hourly-paid workers spot underpayments which would have been missed without tracking their hours. WAC is free to download from the App Store and Google Play Store.