Government announce commitment to deliver a genuine living wage: What does that mean for businesses?
Next year’s National Living Wage and National Minimum Wage have been hot topics of discussion with experts warning they must go up to meet the Government’s goal for it to match two thirds of median earnings.
The Government has reaffirmed its commitment to delivering a genuine living wage for working people by setting out its new considerations to the Law Pay Commission (LPC).
With the National Living Wage and National Minimum Wage figures updated annually, businesses will need to prepare as there is wide expectation both will increase from April 2026.
Businesses will need to undertake the changes when they are announced and ensure they have a plan and the budget in place to manage the potential payroll increases.
What considerations has the Government set out?
Ahead of next year’s change in wage rates, the Government has outlined its considerations to the LPC when deciding what will come into effect next April.
The most notable of their considerations is removing the discriminatory age bands. This would enable significant progress towards a single wage rate for adults.
Currently, employees over the age of 21 or over must be paid a minimum of £12.21 an hour but employees between the age of 18 and 20 must be on a minimum rate of £10 an hour.
The Government want to align wages, so it is fair for all and ensure workers between the ages of 18 and 20 are paid fairly for the work they do.
In addition to this, they have recommended the LPC continue their same approach of assessing the impact of wage reforms on different sectors. They want to ensure the recommendations support both economic growth and fair play.
They also reiterate in their considerations their commitment to improving the cost of living, putting this at the forefront of their plan for change.
What is expected to be announced in April 2026?
While around three million workers have benefitted from the Government’s decision to include the cost of living in their remit to the LPC, they still have work to do to meet their own targets for minimum wage to match two thirds of median earnings.
Minimum wage has been steadily increasing, rising by 6.7 per cent earlier this year. However, there is growing noise from financial experts that the Government will need to increase the minimum wage once again next year.
The UK’s pay body expects minimum wage to rise by 4.1 per cent in April 2026, increasing from £12.21 to £12.71. This rise reflects faster growth in average earnings and would meet the Government’s own targets.
It remains speculative at this stage, but there is wide expectation the National Living Wage and National Minimum Wage will increase next year.
It’s important your business considers the potential increases and plans accordingly.
What does this mean for businesses?
With the wage rates expected to increase, businesses will need to meet the legal requirements in place.
You will need to budget for higher wage and payroll costs if you employ individuals working on minimum wage so it’s important you plan and budget for higher costs.
Furthermore, should the LPC introduce a single wage rate, your employees between the ages of 18 and 20 would need to match those of employees aged 21 and over. This could also contribute to increased employment and payroll costs.
The increase payroll costs will affect other areas of your business. Extra employment costs will mean you need to find the funds from other areas of your business and impact profit margins.
How can I prepare for potential payroll cost increases?
Should any changes to minimum wage rates come into law, you should speak with finance experts who can advise you on the best course of action to ensure you are ready for every eventuality.
Finance experts can help you analyse your current employment expenses and payroll costs, plan for the changes to come in April and answer questions you may have. They will give tailored advice and support that will suit your needs as well as those of your business.
Our team are here to help you stay on top of the never-ending payroll changes and help you plan accordingly.
Need support with your payroll costs? Get in touch with our team for advice and support
