The UK's Spring Statement of 2025, delivered by Chancellor Rachel Reeves, confirmed how the government plans to manage the country’s finances through spending and taxation measures.

One significant area of spending is on welfare. The government is making adjustments to welfare benefits that will aim to save £5 billion annually by 2030. But they also raise concerns about their impact on employees who rely on financial support. 

HR teams must prepare to address these changes and support employees through potential financial hardships.

Welfare benefit adjustments

The key welfare changes outlined in the Spring Statement include:

• Stricter Personal Independence Payment (PIP) assessments: The government plans to introduce more rigorous eligibility tests, potentially reducing the number of claimants receiving this financial support. Employees with disabilities or long-term health conditions may face increased financial strain.
• Incapacity Benefit freezes: Payments for those unable to work due to health reasons will remain at current levels despite inflation. This freeze effectively reduces the real value of these benefits over time, making it harder for affected employees to cover essential living costs.
• Reduction of Universal Credit health element: From April 2026, the health element payment of Universal Credit will be reduced from £97 per week to £50 per week and will remain at this rate until 2029/30. This will affect employees who are limited to how much work they can do, and therefore earn, because of a health condition or disability.

The impact on employees

These welfare cuts will have profound implications for employees, particularly those on low incomes, single-income households, caregivers or those with additional financial needs.

Ramifications include:

1. Increased financial struggles: Employees who previously relied on welfare benefits to supplement their wages may find it harder to afford rent, utilities, and other essential bills.
2. Higher workplace stress: Financial insecurity is a leading cause of stress, which can impact productivity, morale, and overall well-being. 

58% of single-income households are distracted at work because of money worries and 41% of employees earning £35,000 or less worry about money every day*

3. Reduced workforce participation: Some employees may struggle to balance work with the loss of financial support, particularly those with health conditions or caregiving responsibilities.
4. Lower disposable income: Reduced government support means employees will have less money to spend, potentially affecting their quality of life and overall economic activity.

How HR teams can support employees

HR departments play a critical role in helping employees navigate these financial challenges. Here are some proactive steps HR teams can take:

1. Enhance Employee Assistance Programmes (EAPs): Ensure employees have access to financial counselling and mental health support services to help them manage stress and financial concerns.
2. Provide professional group and one-to-one support: Offer training and guidance on budgeting, debt management, and savings strategies to help employees feel confident making financial decisions. 74% of employees would like to talk to a professional expert.*
3. Review salary and benefits packages: Conduct regular assessments of compensation structures to ensure fair pay and explore additional employee benefits, such as hardship funds, loans or benefits in kind.
4. Promote flexible work options: Flexible work arrangements could allow employees to reduce commuting costs and better manage personal expenses.
5. Create support networks: Facilitate peer support groups where employees can share financial knowledge and experiences, fostering a sense of community. Opening up the conversation about money can help employees feel more supported.
6. Champion employee needs: Engage with policymakers and industry groups to voice employee concerns and push for workplace policies that address financial insecurity.

By taking these steps, HR teams can help ease the negative impact of welfare cuts, ensuring employees feel supported during this period of financial uncertainty.

Addressing these concerns proactively can lead to higher job satisfaction, improved retention rates, and a more productive workforce. So use this as an opportunity to promote your company values and strengthen the relationship with your employees.

*Figures from Bippit’s Money at Work 2025 HR Report. You can get a copy of the report here.