The Low Pay Commission, an independent body that advises on nationally set wages, said a 4.1% increase in the NLW from its current base of £12.21 would ‘ensure it does not fall below two-thirds of median earnings’ - a target set by the Government in its annual remit.
Under this central estimate, it adds that the range of the rise it recommends could be as low as £12.55 or as high as £12.86 per hour.
It also warns that its central estimate may rise further if wage growth continues to outperform forecasts.
Last year’s Budget saw the NLW, which is the minimum wage for those 21 and over, rise 6.7%.
The minimum wage rate for 18 to 20-year-olds rose 16.3% to £10 per hour, reflecting the Government’s plans to eventually establish a single adult rate, while the 16 to 17-year-old rate shot up 18% to £7.55, with the same increase applying to the apprentice rate.
The new rates came into effect in April this year alongside other employment cost increases including the rise to National Insurance contributions (NICs) for employers.
Responding to the update from the Low Pay Commission, trade body UKHospitality calls for ‘more sustainable increases’ in wages going forwards.
“UKHospitality and its members have always supported the principle of the National Living Wage, and we share the Government’s ambition to raise living standards for everyone,” says Kate Nicholls, chair of UKHospitality.
“The ambition is right, but the timing and pace of increases must be carefully considered in the context of the wider economic environment.
“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 counterproductive, 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.
“The Government rightly places economic growth at the heart of its mission, but for that to succeed, wage policy cannot be set in a vacuum.
“Therefore, we strongly advocate that the Low Pay Commission’s approach and subsequent targets fully take account of the impact on employment levels and overall economic growth. “This will ensure that future National Living Wage rates support, rather than hinder, our shared goal of a prosperous economy with opportunities for all.”
Earlier this week it was revealed via the Hospitality Market Monitor from CGA by NIQ and AlixPartners that the number of hospitality venues fell by 374 in the first half of 2025, equating to 62 net closures per month, or two per day.
The rise in closures was attributed to the new employment costs introduced in April, which have strained site profitability and led to further company restructurings.