What welfare reforms mean for your employees

Many of your colleagues or their family members will rely on state benefits to make ends meet.

And the government has this week confirmed more details of its planned welfare reforms.

It’s important to be aware of these changes, as they can have a big impact on how people show up at work - and often whether they can work at all.

So let’s take a closer look at what’s happening and what it means for your team and - potentially - your business.

From November 2026, changes to personal independence payment (PIP) eligibility will mean people must score at least four points in one daily living activity to continue receiving the daily living component.

For those who no longer qualify, the government has confirmed a 13-week transition period (up from 4 weeks), during which payments will continue. 

This offers individuals a little more breathing room to adjust, plan their finances, and access additional employment or wellbeing support.

This transition period will also apply to those who lose eligibility for carer’s allowance and the carer’s element of universal credit.

Government figures show that the number of PIP awards has more than doubled from 13,000 a month before the pandemic to 34,000 a month.

But significantly, this increase has been fuelled largely by more people reporting anxiety and depression as their main condition.

In 2019, 2,500 people a month were awarded PIP for these conditions.

By 2023, this figure had gone up to 8,200 a month.

That’s a reminder to employers to be on the front foot when it comes to mental health and take steps to support their team day-to-day.

The standard rate of universal credit is set to increase above inflation for the next four years.

That’s potentially worth £725 more a year for a single adult aged 25 by 2029/30.

But from April 2026, the health element of new universal credit claims will be reduced to £50 per week.

Those affected will be help from dedicated Pathways to Work advisers.

People with severe, lifelong conditions won’t be reassessed and will continue receiving the higher health top-up of £97 per week.

Importantly, the government has confirmed a new “Right to Try” guarantee, so people currently getting sickness benefits can try employment without worrying about losing vital support. 

This may give some employees the confidence to re-enter the workforce after illness or long-term leave.

Meanwhile, funding for employment and health support will quadruple to over £1 billion by 2029/30, so more people who can work are helped back into employment.

According to government figures, one in ten working age people are currently claiming a sickness or disability benefit.

Ministers believe that unless the system is overhauled, the number of working age people on disability benefits will more than double this decade to 4.3 million.

Spending on working age disability and incapacity benefits has risen by £20 billion since the pandemic and is expected to go up to £70 billion a year by the end of this parliament.

Liz Kendall, the work and pension secretary, said the proposed changes will support “those who can work to do so” and put welfare spending on a “more sustainable path”.

This, she stated, will “unlock growth” and make sure those who can’t work are protected.

“Our social security system is at a crossroads,” Ms Kendall commented.

“Unless we reform it, more people will be denied opportunities, and it may not be there for those who need it.”