There’s renewed attention on workplace pensions and whether current auto-enrolment minimums are delivering adequate outcomes. Against that backdrop, new findings from a survey of 500 senior UK HR and business leaders highlight a simple tension for employers: pensions matter, but so does the headroom to fund them without undermining recruitment and retention.
And with the Budget curbing NICs savings on salary sacrifice from 2029 via a new £2,000 threshold, affordability tightens further – so contribution design and payroll readiness matter over the next three years.
The survey shows a meaningful minority of employers are close to their cost limits. If employer pension contributions were mandated to rise, one in six organisations (17%) say the additional burden could push them towards insolvency. A further 31% would freeze hiring, and more than a fifth would reduce headcount. Only 17% believe they could absorb an increase with minimal disruption.
Those numbers matter for HR and Reward leaders because they sit alongside another clear message from the research: employers have already been investing in people to keep hold of the talent they’ve got. Many have raised salaries, expanded training for juniors, and added healthcare – all with retention in mind. Yet the data also points to a risk: in many organisations, decisions on where to spend are being made without consistently tracking what employees use, value or respond to.
This article pulls out the essentials from the research and introduces the bigger picture explored in ‘Britain’s Got Talent’ – our long-form Employer DNA piece on the growing commercial importance of retention.
What the Survey Tells Us About Employer Headroom
The headline pension finding is stark. Asked how they would cope with a mandated rise in employer pension contributions:
- 17% of respondents say it could threaten their organisation’s viability.
- 31% would pause recruitment.
- More than 20% would reduce headcount.
- Just 17% feel confident they could manage the cost with minimal disruption.
From 2029, the Budget’s £2,000 salary sacrifice threshold will also erode employer NICs savings on higher employee contributions, adding to the pressure on pension affordability.
For mid-sized employers, that translates into a real trade-off: support better long-term saving while maintaining the workforce capacity needed to deliver today. The figures don’t argue against better pensions; they show why blunt cost increases, in isolation, can create unintended consequences in hiring and service delivery.
Why Retention Has Become the Rational Strategy
Across the same sample of 500 leaders, organisations report a labour market where replacing experience is slower and pricier than in the recent past. That’s why so many have already acted:
- Salaries have been increased to stay competitive for in-demand roles.
- Training for junior staff has been expanded, aiming to build pipelines internally.
- Healthcare support has been added or enhanced to keep people healthy and at work.
Alongside that, AI and automation investments are moving ahead. Many employers have funded tools and training to capture productivity gains – while also acknowledging that, for some roles, the changes could thin future leadership pipelines if not managed well.
At the same time, capacity risks haven’t gone away. Skills gaps are a concern for well over two-thirds of employers, and poor mental health continues to feature as a significant operational risk. Taken together, these pressures explain why retention shows up in the research as a commercial imperative rather than a soft metric. Holding on to people you already trust often costs less than replacing them.
A Recurring Theme: Spend Without the Measurement to Match
One of the most consistent patterns in the findings is the gap between action and evidence. Many organisations have increased pensions, boosted benefits or broadened wellbeing offers without first collecting the employee data that would show what’s working.
A few specific gaps recur:
- Pensions engagement isn’t consistently tracked, even where employer contributions have been lifted.
- Benefit utilisation data is incomplete, making it hard to see where spend is undervalued or duplicated.
- Retention-signal metrics – such as eNPS, stress indicators or happiness scores – aren’t always connected to reward decisions.
The risk is straightforward: when a new cost arrives (for example, an increase to employer pension contributions), organisations may cut visible but valuable support while preserving low-impact spend – simply because they don’t have the measurement to tell the difference.
What HR and Reward Should Take from the Numbers
Grounded strictly in the research, three takeaways stand out:
Budget pressure is real and uneven. A material minority of employers would face severe stress from a mandated pension increase. Others could absorb it with limited disruption. Planning for change will look different depending on your starting point.
Retention spend is already happening. Employers have lifted pay, expanded training and added healthcare. Any future pension cost needs to be seen in that context – not as an isolated line item, but as part of a broader package that keeps people in post.
Measurement is the missing link. The survey repeatedly surfaces a data gap. Without better tracking of benefit usage, pension engagement and retention signals, employers risk making the wrong trade-offs if costs rise.
Those points don’t prescribe a single answer; they explain why joined-up, evidence-based decisions will matter if pension contributions change.
Introducing ‘Britain’s Got Talent’
The broader article – Britain’s Got Talent: the growing commercial importance of retention – steps back from pensions specifically and looks at what’s driving retention to the top of the agenda. It explores:
- Why domestic and international talent pipelines are tighter than employers would like.
- How organisations are balancing salary, training and healthcare to protect capability.
- Where AI is already reshaping roles – and why that matters for future leadership pipelines.
- The role of workforce data in making reward decisions that employees actually notice and value.
If the survey headlines above capture the immediate pressure points, ‘Britain’s Got Talent’ provides the fuller context for HR and Reward teams who want to align pensions policy, benefits strategy and workforce capacity.
Final Word
The research doesn’t argue for or against higher employer pension contributions. It does show that a one-dimensional approach risks the very outcomes employers are working hard to achieve: stable teams, protected capacity and sustainable growth. If contributions do rise, the findings suggest two things will separate the resilient from the rest:
- Seeing pensions as part of the total people strategy, not a standalone cost.
- Building decisions on employee evidence, so that spend flows to what people truly use and value.
For HR and Reward professionals, that’s the path to supporting better retirement saving and protecting the capability your organisation relies on today.
Martin Willis
Martin Willis is a Partner and Senior Client Relationship Manager at Barnett Waddingham. He advises employers and trustees on defined contribution strategy and chairs the Society of Pension Professionals’ DC Committee. Martin advises UK and multinational employers and trustees on DC scheme design, governance and member engagement, and has contributed evidence to government and parliamentary reviews on auto-enrolment and saver outcomes.