Employees over the age of 21 are set to have their National Living Wage increased to £12.71 per hour.
The Treasury announced the increase ahead of today's (26 November) Budget.
The rise to £12.71 marks a 50p increase in the current hourly minimum wage rate.
As part of the minimum wage increases announced today, workers aged between 18 and 20 seeing an 85p rise to £10.85, and under-18s and apprentices will get 45p more to £8 an hour.
All rises will take effect in April 2026.
The minimum wage increases are on top of last year’s 6.7% rise for over-21s and a 16.3% rise for 18-20-year-olds, respectively.
National Insurance contributions (NICs) were raised from 13.8% to 15% in April, following last year’s Budget.
The Treasury said the new minimum wage rates struck a balance between “the needs of workers, the affordability for businesses and the opportunities for employment”.
Harriet Gardner, associate in the employment team at Wake Smith Solicitors, looks at the increase.
She said: “The uplift to £12.71 for workers aged 21 and above will put upward pressure on wage differentials, particularly for entry-level and lower-mid-tier roles, where maintaining internal pay hierarchy becomes essential for retention and fairness. Employers may also see compression effects, where previously distinct pay bands narrow, creating challenges in recruitment, motivation and career progression.
“These changes coincide with rising National Insurance contributions, further increasing the total cost of employment. For labour-intensive sectors, even small adjustments in hourly rates can translate into significant annual cost increases once staffing levels, overtime patterns and premium payments are factored in.”
Beyond direct payroll costs, employers may face secondary impacts, including:
- Workforce restructuring pressures as organisations review the sustainability of certain roles or working patterns. This might mean that organisations are forced to explore making certain roles redundant.
- Potential price adjustments in customer-facing sectors to absorb increased costs.
- Increased competition for lower-paid labour, as higher wage floors attract workers to sectors they may previously have overlooked.
- Greater scrutiny of compliance, with HMRC enforcement of NMW breaches becoming more proactive each year.
Your next move?
If you want assistance on employees issues in your workplace, contact the employment team at Wake Smith to discuss your options.
Our team can support employers by reviewing job architectures and advising on operational changes to maintain both compliance and competitiveness. We also help organisations communicate pay changes transparently to reduce employee relations challenges.
Call Wake Smith Solicitors on 0114 266 6660.