National living wage boost ordered for UK but employers warn 'indicators are flashing red'

The National Living Wage is poised for a significant increase next year, with experts forecasting a possible rise of up to 65p per hour for UK workers, from the current £12.21. This could see workers in 2026 earning £5 more than a decade ago, a rise of 79 per cent.

The Low Pay Commission (LPC) has been charged with uplifting the so-called national living wage, as Labour pushes for "a genuine living wage" that better reflects the cost of living.

To stay above the threshold of two-thirds of median earnings - a target set by the Government - the LPC suggests an increase to £12.71 by 2026. Yet, due to potential economic shifts in the coming months, next year's national living wage could vary, reaching between £12.55 and £12.86 per hour.

While this will be good news for millions of low-paid workers, such a stark increase has already raised concern among some employers. Katie Nicholls, UKHospitality's chief exec, has warned the Government of "escalating employment costs" that are already causing widespread industry redundancies.

Nicholls warned: "With significant new costs, such as the increase made to employer national insurance contributions, already hitting businesses hard, any significant wage hike may cost jobs.

"We urge the Low Pay Commission to recognise these cost pressures and recommend a more gradual and sustainable increase this year.

"Regrettably, escalating employment costs are already forcing businesses to reduce staff hours and, in some cases, make redundancies. Across the board, the labour market indicators are flashing red, and the Bank of England has also repeatedly voiced concerns about a potential wage-price spiral fuelling inflation.

"Inflating wages too far, too fast, would be counter-productive, resulting in fewer people earning a little more, but many more facing job losses or reduced hours, ultimately undermining the goal of putting more money in people's pockets."

Meanwhile, Deputy Prime Minister Angela Rayner and Business Secretary Jonathan Reynolds have written to the commission, urging them to consider the cost of living when deliberating on changes to the national living wage.

The Government has reiterated its pledge to ensure that the minimum wage genuinely represents a living wage, declaring: "We continue to recognise that our ambition should be backed by evidence, and that the minimum wage rate should be consistent with delivering inclusive growth for working people and businesses alike.

"We are therefore asking the LPC to recommend a national living wage rate that is at least two-thirds of UK median earnings for workers aged 21 and over, to apply from next April."

The hourly minimum wage is age-dependent, and apprentices have their own rates. To qualify for the National Minimum Wage, you must be of school-leaving age, while the National Living Wage requires you to be at least 21 years old, with those aged 20 and under still eligible for the minimum wage.

From April 1, 2025, approximately three and a half million workers experienced a wage increase, although the actual impact on payslips varies individually. The National Living Wage jumped from £11.44 to £12.21 per hour.

Since 2024, individuals aged 21 and over have been entitled to this rate, adjusted down from the previous 23 year old threshold.

The government has announced that this rise could mean an extra £1,400 per year for a full-time employee. For younger workers, aged between 16 and 20, different rates of the National Minimum Wage apply according to their age.

On August 5, 2025, the government unveiled the Low Pay Commission's recommendations for future rates of both the National Minimum Wage and National Living Wage, effective from April 2026. The guidelines for the National Living Wage state: "The government is committed to raising the living standards of working people and this is the key focus of the Government's Growth Mission."

The document goes on to explain: "That is why the government asks the Low Pay Commission to ensure that the National Living Wage rate does not drop below two-thirds of UK median earnings for workers in the National Living Wage population, a recognised measure of low hourly pay.

"The Low Pay Commission should take into account the cost of living, inflation forecasts between April 2026 and April 2027, the impact on the labour market, business and competitiveness, and carefully consider wider macroeconomic conditions."

In separate developments, ministers are pushing forward with plans to scrap "discriminatory" age-based minimum wage bands, expanding the Low Pay Commission's (LPC) remit to examine this matter.

The LPC has been instructed to consult with employers, trade unions, and workers regarding narrowing the gap between the national living wage and the minimum wage for 18 to 20-year-olds, which currently sits at £10. Separate minimum wage rates also exist for under-18s and apprentices, fixed at £7.55.