As 2025 winds down and the mince pies start appearing, HR and payroll leaders are gearing up for something a little less festive but absolutely vital: budgeting for 2026. But don’t worry—this isn’t just about crunching numbers. It’s about crafting a smart, flexible plan that helps your business thrive in the year ahead.
The Big Picture: Economy, Regulations and Reality Checks
The UK’s economic growth is predicted to be a modest 0.9% next year, now is the time for scenario planning, not guesswork. Think chess, not checkers.
Watch this space for further news beyond the autumn budget next month.
Salaries: Steady as She Goes (But Still Growing)
Salary increases are calming down a bit—Payscale says average base pay bumps will hover around 3.5%, and Mercer’s got merit increases pegged at 3.3%.
So while the pay curve is flattening, payroll teams still need to budget for growth, surprise raises, and cost-of-living tweaks. Flexibility is your friend here.
Rethinking the Workforce: It’s Not Just About Headcount
With minimum wage hikes, pension reform, and tax changes looming, the cost per employee is going up.
So instead of asking “How many people?”, ask “What kind of people?” Focus on essential roles, retention strategies, and a smart mix of full-time, freelance, and outsourced talent.
Tech Time: From Expense to Advantage
Smart teams are setting aside 10–15% of their budget for digital transformation. Why? Because tech doesn’t just save time – it boosts accuracy, agility, and governance. It’s like giving your payroll team a superpower cape.
Flexibility Is the New Forecast
The best budgets for 2026 will be adaptable. That means building multiple models (conservative, moderate, growth-focused), factoring in tax changes and inflation and keeping a contingency fund (5–7% of your budget) for curveballs.
And don’t go it alone – bring HR, finance and ops together to build a budget that’s collaborative, strategic, and measurable.
Grab that coffee, rally your team and start building a budget that’s ready for anything 2026 throws your way. If you have any payroll queries, just drop me an email – info@pixiepayroll.co.uk