Heads up: What the increase in NLW means for employers and HR teams

Yesterday, the Government confirmed that from April 2026 we will see another increase in the statutory wage floors: the NLW:

 For over-21s will increase from £12.21 to £12.71 per hour

NMW for younger workers aged 18-20 will also rise to £10.85/hr

16–17-year-olds and apprentices to £8.00/hr.

As an HR consultant I’d encourage all employers, large and small, to treat this not as a trivial “tick-box compliance” but as a strategic prompt to review how your workforce planning, pay structure, and overall people costs align with business goals.

Why this matters now

• It affects 2.4–2.7 million workers: The rise to £12.71/hr for over-21s will impact many low-paid, full-time roles; for many this could translate to an extra ~£900 annually.

• Youth and apprenticeships get a bigger boost: The 8.5% increase for 18–20-year-olds, and 6% for 16–17-year-olds/apprentices, narrow the gap with adult rates, a signal from Government that younger workers and apprentices are being more seriously factored into minimum pay policy.

• A wider policy context: The rise is part of a broader strategy, advised by the Low Pay Commission (LPC), aiming to keep statutory wages at a reasonable fraction (two-thirds) of median earnings, while balancing business sustainability.

  
  

What employers / HR should do now

1. Review payroll budgets & staffing costs

With higher hourly pay rates, overall wage bills will rise, especially in sectors dependent on lower-paid labour (retail, hospitality, care, etc.). It’s sensible now to model different scenarios (e.g. full-time staff at new rate, part-time roles, shifts, overtime) to understand the cost impact from April 2026.

2. Reassess your pay strategy and structure

This is a good time to revisit pay bands, progression policies, and whether certain roles might warrant reclassification (e.g. roles currently classed as “junior” might merit higher pay or a shift in responsibility). For apprenticeships or young workers, consider whether to continue at NMW or exceed it, especially if you’re using pay as a retention/recruitment tool.

3. Think about productivity, efficiency and value

If wage costs rise, organisations should aim to maintain, or improve, productivity per pound spent. That can mean upskilling staff, better shift planning, cross-training, or streamlining processes. Efficiency and output become more important when inputs (wages) go up.

4. Consider employer obligations and compliance risk

It’s mandatory to pay at least the statutory minimum. Underpaying risks penalties and reputational damage. As HR leaders, now is a good time to audit payroll systems, timesheets and contracts to ensure compliance by April next year.

5. Communicate with staff - especially lower-paid or younger employees

For many staff this change will make a real difference to take-home pay. Transparent communication about what’s changing, when, and why helps retain morale and trust, especially in sectors where staff turnover is high.

Risks and tensions: What to watch out for

• For smaller employers in labour-intensive sectors, rising wage bills may squeeze margins, potentially leading to price increases or reduced hiring. This is a genuine concern flagged by some business groups.

• For young workers and apprentices, while the increases are welcome, there is a risk that fewer entry-level jobs become available if employers are squeezed, something that commentators have warned about.

• Because the statutory wage floor is still well below a “living wage” benchmark for many areas, low-paid staff may still struggle, especially given continuing cost-of-living pressures.

  
  

Strategic considerations for HR and business leaders

As an HR consultant advising clients, I see the coming increase as more than compliance: it’s a strategic pivot point. Use it to:

• Reassess your staffing model and pay structure before April 2026.

• Audit current wage and contract compliance.

• Evaluate whether to use this moment to invest in productivity, training or automation.

• Consider whether to pay more than the statutory minimum, to attract and retain good staff, especially if your sector is competitive.

• Review long-term workforce planning, given possible ripple effects (e.g. pricing, staffing levels, recruitment, turnover).