The National Living Wage and National Minimum Wage continue to spark nationwide discussion as pressure mounts on the Government to fulfil its commitment to ensuring the minimum wage equates to two-thirds of median earnings.
With key changes anticipated from April 2026, employers must begin preparing and budget accordingly for all potential changes.
While any changes won’t be officially confirmed until April next year, businesses must analyse their current measures and payroll costs to ensure they can meet the requirements.
Government reaffirms its commitment to fair pay
The Government has once again underlined its pledge to deliver a real living wage by outlining new guidance to the Low Pay Commission (LPC). These recommendations are aimed at shaping the minimum wage changes expected next year, with a particular focus on fairness and sustainability across sectors.
One of the most significant changes under consideration is the removal of age-based wage bands, which currently allow for different minimum wage rates depending on age. At present, workers aged 21 and over must be paid at least £12.21 per hour, while those aged 18–20 are entitled to a minimum of just £10 per hour.
Removing these distinctions would pave the way for a unified adult wage rate, ensuring younger workers are fairly compensated for their contributions and moving the UK closer to wage equality.
Putting potential changes into perspective
The LPC has also been urged to continue analysing how wage increases affect various industries. Balancing fair wages with economic growth is central to the Government’s approach, and they have reaffirmed that improving the cost of living remains a top priority.
While changes are not yet confirmed, employers should be aware that updates are typically announced annually meaning changes could be just months away.
What has been speculated about minimum wage changes?
Thanks to previous reforms, nearly three million UK workers have seen a boost in their earnings. Yet to meet the Government’s own wage goals, there is wide belief from finance experts the minimum wage rate will need to increase.
It is believed the National Living Wage needs to increase by 4.1 per cent, rising from £12.21 to £12.71 per hour in April 2026. This would reflect stronger earnings growth and bring the minimum wage closer to the two-thirds median earnings benchmark.
Although this projection remains speculative, there is a strong expectation that both the National Living Wage and Minimum Wage will rise.
How does this impact employers?
Any increase in minimum wage rates brings with it legal obligations and financial considerations. If your business employs staff currently on minimum wage, it’s vital to assess how these changes will impact your payroll expenses.
In addition, should the LPC implement a unified adult wage rate, workers aged 18–20 will be entitled to the same rate as those aged 21 and over. This would further raise employment costs and could affect broader business operations, including staffing budgets, pricing strategies, and profit margins.
How can I manage payroll costs effectively?
To stay ahead, businesses should begin reviewing their payroll costs and financial plans now.
Consulting with payroll or finance experts can provide clarity on how wage increases may affect your current operations and what steps you should take to prepare.
From analysing current payroll outgoings to developing new financial models, professional advisers can help create a tailored strategy for managing potential increases, ensuring you meet your legal obligations.
Ready to implement a plan to manage payroll costs? Speak with our team