The National Minimum Wage is increasing again from April 2027, bringing higher hourly pay for millions of workers across the UK. While this is welcome news for employees, it means another increase in employment costs for businesses.
The changes, announced ahead of the Autumn Budget, will see the National Living Wage for employees aged 21 and over rise to £13.21 per hour. Younger workers and apprentices will also receive an increase.
For employers, the challenge isn't just making sure everyone receives the correct hourly rate. Higher wages can affect payroll budgets, National Insurance, pension contributions and overall business profitability.
So, what are the new National Minimum Wage rates for 2027, how much could they add to your wage bill, and what should your business be doing to prepare?
From 1 April 2027, the National Living Wage and National Minimum Wage rates will increase by 3.9%.
The new hourly rates are:
| Employee age / category | Current rate (April 2026) | New rate (April 2027) | Increase |
|---|---|---|---|
| 21 and over | £12.71 | £13.21 | 50p |
| 18–20 | £10.85 | £11.27 | 42p |
| Under 18 | £8.00 | £8.31 | 31p |
| Apprentice rate | £8.00 | £8.31 | 31p |
The National Living Wage applies to workers aged 21 and over. Different National Minimum Wage rates apply to younger employees.
The apprentice rate applies to apprentices aged under 19, and those aged 19 or over who are in the first year of their apprenticeship. Apprentices aged 19 or over who have completed their first year are generally entitled to the minimum wage for their age group.
Although the increases are the same percentage across all categories, the additional cost will vary depending on the number of employees you have in each group.
An extra 50p per hour might not seem like a significant increase on its own. However, when you multiply this across a full working year and several employees, the additional cost can quickly add up.
For example, consider a full-time employee aged 21 or over, working 35 hours per week:
| Current rate | New rate | |
|---|---|---|
| Hourly pay | £12.71 | £13.21 |
| Weekly gross pay | £444.85 | £462.35 |
| Annual gross pay | £23,132.20 | £24,042.20 |
This represents an additional £910 in annual gross wages for one employee.
For a business employing ten people on the same hours and rate, that's an additional £9,100 in basic wages over a full year.
And this is before considering the wider costs associated with employing staff.
When calculating the financial impact of the minimum wage increase, it's important to look beyond basic salaries.
Other costs may also increase, including:
Employer National Insurance: Higher salaries can increase employer National Insurance contributions, depending on individual earnings and applicable thresholds and allowances.
Workplace pension contributions: Increased qualifying earnings can affect the amount businesses contribute to employee pensions.
Holiday pay: Higher normal pay can increase holiday pay costs, depending on the employee's working arrangements and how their holiday pay is calculated.
Overtime and other payments: Where overtime, bonuses or other payments are linked to basic hourly rates, these may also need reviewing.
The precise impact will depend on your employees' circumstances and your existing payroll arrangements.
If you employ a large number of people on or around the minimum wage, it's worth calculating the combined increase rather than looking at each employee in isolation.
The minimum wage increase could also have an impact on employees who already earn above the statutory rates.
For example, imagine a business where a supervisor currently earns £13.50 per hour. Once the new National Living Wage comes into effect at £13.21, the difference between their hourly pay and that of a new employee on the minimum rate will be just 29p.
This doesn't mean employers are legally required to increase everyone's pay when the minimum wage rises. However, it does raise questions about whether existing pay structures still reflect employees' experience, responsibilities and seniority.
Businesses may need to consider whether further pay adjustments are appropriate to maintain morale, recognise additional responsibilities and retain experienced employees.
It's therefore sensible to review your wider salary structure when preparing your payroll budget for 2027/28, rather than focusing exclusively on employees directly affected by the increase.
With the new rates confirmed, businesses have time to understand the financial implications and make any necessary adjustments.
Here are five areas worth reviewing before April.
Start by identifying which employees will be affected by the new rates and calculating the additional annual cost.
Remember to include employer National Insurance, pension contributions and any other related employment costs.
Update your budgets and cash flow forecasts to reflect the changes from April 2027. This will help you understand whether your business can absorb the increase or whether other adjustments may be needed.
If your business relies heavily on employees, higher wages could increase the cost of delivering your products or services.
Consider whether your current pricing still allows you to maintain your target profit margins.
This is particularly important for businesses operating on fixed-price contracts or agreements where you may not be able to pass additional costs on to customers immediately.
Make sure your payroll software and processes are ready for the new rates.
Check employee ages, apprenticeship arrangements and working hours to ensure everyone receives the correct minimum wage from 1 April 2027.
It's also worth reviewing any deductions or payments made through payroll, as certain deductions can affect whether an employee is receiving the correct minimum wage.
Higher employment costs may mean reviewing how your business currently operates.
Could working patterns be more efficient? Are there opportunities to improve productivity or reduce unnecessary overtime?
This isn't necessarily about reducing staff numbers. It's about understanding how your existing workforce contributes to business performance and whether resources are being used effectively.
Look beyond employees receiving the minimum wage.
Review existing salaries and consider whether the increased minimum rates create pay differences that no longer reflect experience or responsibility.
Factoring this into your planning now can help avoid unexpected pressure on your wage bill later.
The minimum wage announcement wasn't the only Budget measure relevant to employers.
Some businesses may benefit from changes to business rates, particularly those operating in the retail, hospitality and leisure sectors in England.
The Government has also announced additional support for qualifying pubs, social clubs and live music venues through increased business rates relief.
However, the availability and value of these measures will depend on your business and circumstances. It's worth reviewing which changes apply to you rather than assuming that additional support will automatically offset higher employment costs.
For a wider look at the announcements, read our Autumn Budget 2026 summary.
The increase in National Minimum Wage rates is another change employers will need to factor into their financial planning.
For businesses with only a handful of employees, the additional cost may be relatively manageable. For those with larger teams, particularly in sectors such as retail, hospitality and care, the combined impact could be much more significant.
The key is to understand the full financial impact before the changes take effect.
Reviewing your payroll costs, pricing, profit margins and cash flow forecasts now will give you more time to make informed decisions and avoid unexpected pressure on your finances.
At Inform Accounting, we help businesses understand their numbers, plan ahead and make confident financial decisions.
Get in touch with our team to discuss your budgets, forecasts and wider business finances.
The new National Living Wage and National Minimum Wage rates come into effect on 1 April 2027. Employers must ensure eligible employees receive at least the new statutory hourly rates from this date.
The National Living Wage for employees aged 21 and over will increase from £12.71 to £13.21 per hour from April 2027, representing a 50p hourly increase.
The National Minimum Wage for employees aged 18–20 will increase to £11.27 per hour from 1 April 2027, an increase of 42p.
The additional cost will depend on the number of affected employees and their working hours. For example, a full-time employee aged 21 or over working 35 hours per week will receive an additional £910 in gross annual wages following the 50p hourly increase. This excludes additional employer National Insurance and pension costs.
No. Employers must ensure employees receive at least the applicable statutory minimum wage. There is no automatic legal requirement to increase the pay of employees who already earn more than the new minimum rate. However, businesses may wish to review their wider pay structures.
Employers who fail to pay the correct minimum wage can face HMRC enforcement action, including repayment of arrears to affected employees and financial penalties. Businesses should check their payroll arrangements to ensure they remain compliant.