Most workers in hospitality and retail are earning less than the national living wage that comes into force today, according to new analysis.
Research by workplace finance platform Stream suggests that 77% of hospitality staff and 70% of retail staff are currently paid below the rate that will apply from 1 April.
Drawing on real‑time payroll data for almost one million UK employees, the study found that the majority of workers in these sectors are still earning beneath the legal minimum threshold.
From 1 April, the national living wage (NLW) will stand at £12.71 an hour, a figure that exceeds the typical hourly rate in hospitality, which Stream reports is £12.26.
Retail shows a similar pattern, though the current median of £12.60 sits slightly nearer to the new minimum. Private healthcare and support services also lag behind.
Stream noted that some employers now appear to treat the NLW as a guide for standard pay rather than a strict minimum.
The report also highlights growing wage compression, with many employees earning almost identical hourly rates. This is particularly pronounced in retail, where most staff fall within 31p of the median.
In hospitality, the gap between the 25th and 75th percentile of hourly pay narrows sharply each April before gradually widening again, as employers reinstate pay differentials that are squeezed by the annual rise.
Retail is even more tightly bunched, with the vast majority of workers earning within 31p of each other. Stream said this reflects large retailers adopting a single pay rate that closely tracks the NLW.
One possible upside this year is that the increase from £12.21 to £12.71 is the smallest rise in four years, which may make the adjustment more manageable for employers and reduce the extent of compression.
Peter Briffett, chief executive officer of Stream, said: “The national living wage is no longer just setting a floor for earnings, it’s increasingly setting the entire market rate. In sectors like hospitality, the typical wage now resets to the minimum every April and barely moves for the rest of the year. That’s a significant shift in how pay works in the UK labour market. While the current increase does mean workers will genuinely take home more each month, each increase compresses wages more tightly, effectively pulling experienced workers back towards the minimum.
“As the national living wage continues to rise, employers will increasingly have to question how they can maintain incentives, skills and progression for their workers – as well as what other tools they can provide to help their employees build financial security.”
This article is based on a piece written for Personnel Today
