The national living wage (NLW) will rise by 4.1% to £12.71 per hour from April 2026, while the national minimum wage (NMW) for 18 to 20-year-olds will increase from £10 to £10.85.
This NLW uplift, which matches the forecast published in August, is the second smallest since the rate was introduced in 2016. Only 2021 saw a slower rise, at 2.2%, during the Covid-19 pandemic.
For someone working full-time at 37.5 hours per week, the new NLW will add £977 to annual gross pay.
The Low Pay Commission (LPC) has also outlined a timetable for extending the NLW, currently for those aged 21 and over, to 20-year-olds in 2027, and to 18 and 19-year-olds in 2028 or 2029, depending on economic conditions and government policy.
While the 8.5% rise for 18 to 20-year-olds moves towards the government’s pledge to extend the NLW to all adults by the end of this Parliament, it is smaller than the double-digit increases seen in recent years.
The government confirmed that it has accepted the LPC’s recommendations in full. This includes a 6% rise in the NMW for 16 to 18-year-olds and apprentices, taking their hourly pay rate to £8.
The LPC will publish its advice and supporting evidence in a report, alongside the Budget. It has noted particular concerns about the resilience of the youth labour market.
Baroness Philippa Stroud, chair of the LPC, said: “The recommendations published today are a product of diligent study of the evidence, careful reflection and significant negotiation. Our advice balances the government’s ambitions with the need to protect the economy and labour market, with rates that are fair and realistic. In our discussions this year with workers and employers alike, it has been clear that no one is having an easy time.
“Despite sustained real increases in the minimum wage, low-paid workers are still challenged by the cost-of-living crisis. At the same time, employers, particularly small businesses, are under real pressure, exacerbated by this April’s national insurance changes. While GDP growth over the past year has been mixed and the labour market has softened, our judgment is that the recent NLW increases have not had a significant negative impact on jobs.”
Neil Carberry, chief executive of the Recruitment and Employment Confederation, said he would have been more cautious about the 8.5% rise for 18 to 20-year-olds, given the challenges around youth unemployment.
“I think everyone is of the view that, over time, it may well be the right thing to do to align the 18+ rate with the adult rate, but in this environment, with the challenges young people face, it feels like another barrier to a lot of young people who are looking for work. The evidence is really clear, the most important thing you can do for an 18-year-old is get them into a workplace. It makes a massive difference to their long-term health and wealth.”
The Resolution Foundation think tank argued that the deterioration in the labour market, particularly the rise in young people not in education, employment or training (Neets), should have led the LPC to take a more cautious stance on youth rates rather than continuing the process of convergence with the NLW.
Nye Cominetti, principal economist at the Resolution Foundation, said: “Younger workers are set for even bigger pay rises, but these steep increases risk causing more harm than good if they put firms off hiring, and push up Neet rates.”
He added that while the minimum wage may be seen as one of the UK’s most significant policy successes in recent decades, flexibility is needed when setting rates to reflect changing labour market conditions.
Ben Harrison, director of the Work Foundation at Lancaster University, said: “The rise to £10.85 per hour could be critical in ensuring that work pays for more young people. At a time when nearly a million young people are not in employment, education, or training, ensuring that being in work offers more financial security could significantly improve their living standards and provide a critical boost to the UK workforce. However, it’s important that government monitors the impact of these rises on the availability and security of entry-level jobs.”
He also noted that the new Fair Work Agency, due to launch in April 2026, must ensure employers do not sidestep NMW increases by shifting towards more insecure forms of work, such as gig economy roles.
Paul Nowak, general secretary at TUC, said: “The government is delivering on its promise to make work pay. With living costs stubbornly high, an above-inflation pay rise will make a real difference to the lowest-paid. Putting more money in people’s pockets is good for workers and good for the economy, as it goes straight back into our high streets and local businesses. And sticking with plans to scrap youth rates is absolutely the right call. Young workers have bills like everyone else and deserve a fair day’s pay for a fair day’s work. It’s right they see a larger rise as youth rates are phased out.”
This piece is based on an article featured on Personnel Today
