National Minimum Wage and Living Wage set to rise: what you need to know

Shortly before the Autumn budget, the Government confirmed their intention to increase both the National Minimum Wage and the Living Wage as of 1 April 2026.

Chancellor of the Exchequer, Rachel Reeves, has commented that these changes mean that, for full-time workers on the National Living Wage (NLW), they will benefit from an increase in pay by £900 per year. Further, for those on the National Minimum Wage (NMW), working full-time, these changes will mean an increase of £1,500.

The NLW was originally introduced in 2016 as a premium on top of the NMW for workers aged over 25. It is now effectively just the top age-related rate of NMW. We therefore refer throughout to the NMW, and so not to confuse with the NLW recommended by the Living Wage Foundation, which is voluntary.

What are the new rates?

The new rates to be implemented are as follows:

As such, for those aged 21 and over, minimum wage is set to increase by 4.1%. Comparatively, for those aged 18-20, they will see an increase of 8.5% to the minimum wage and, for apprentices and those aged under 18, they will see an increase of 6%.

Katherine Chapman, speaking on behalf of the Living Wage Foundation, which sets voluntary, higher standards to promote fair wages in the UK, commented that these changes “will still fall short of the voluntary real Living Wage, the only rate based solely on the cost of living.” Thus, while the increase is of course welcome for workers, wages for lower paid workers remains a cause for concern.

The Low Pay Commission

These new rates mirror the recommendations of the Low Pay Commission (LPC), the independent authority which guides the Government on NMW policy. In its report, the LPC clarifies that, in reaching its conclusions, it must balance the considerations of both workers and businesses.

Of note, one of the key considerations by the LPC included the ongoing struggle with the cost of living. It was recognised that workers had found earlier increases had not adequately offset rising expenses, including housing and energy costs.

Turning to employers, the LPC noted concerns that rising labour costs were eroding profits and prompting some businesses to consider reducing investment and headcount.

Further, the LPC observed a weakening labour market, with vacancies dropping below pre-pandemic levels and unemployment rising. Notably, the LPC reported that PAYE data indicates that the hospitality sector has lost more than 70,000 jobs since the summer of 2024.

Despite this, the view was taken that increases to the NMW have not negatively impacted the job market. As such, increases to the same were justified.

Impact for employers

As a result of these upcoming changes, it is imperative that employers ensure full compliance with the new rates and avoid any legal claims and/or penalties for non-compliance.

Employers should:

• Review the pay rates of applicable workers in order to identify those who will no longer be paid the NMW and, in April 2026, adjusting pay where required
• Inform affected employees of any changes to their wages
• Update job advertisements to ensure compliance with minimum wage rates
• Maintain accurate records to demonstrate compliance.

Employers who do not pay employees at the appropriate NMW rates are not only at risk from potential fines and claims by workers, but also “naming and shaming” by HMRC, recovery of underpayments through tribunals or courts and ultimately, criminal prosecution.

The NMW increase may also have a knock-on effect on the hourly rates and salaries of longstanding staff. To safeguard staff retention employers may wish to increase the pay of workers in the payment band above those whose wages are being increased, in line with NMW, to ensure that an appropriate variance in wages is maintained.

If you have any questions about how these changes to the NMW may affect your workplace or if you require assistance in implementing these changes, please do contact a member of our Employment Team.