National Living Wage predicted to reach £12.71 next year

The government has proposed an increase to the National Living Wage (NLW), from £12.21 to £12.71, from April 2026. While the announcement is said to be “indicative only” and may change, hospitality owners should brace for the increase in costs. 

Pubs, cafes, and restaurants are one of the largest employers of living wage staff, and directly affected by minimum wage rises. 

That means, alongside higher staff costs, hospitality professionals could also have to grapple with tighter margins from next Spring. 

Currently, the NLW is the minimum hourly rate for workers over 21, but there are calls for wage equality between 18-20-year-olds and over-21s, which could raise costs even further. 

What’s changing — and why it matters to hospitality

Every year, the Low Pay Commission (LPC) updates its projections for the National Living Wage in 2026, based on median UK wages. This is because the government has committed to ensuring that the NLW does not fall below two-thirds of median earnings.

Last week, the LPC estimated that the NLW will surge to £12.71 per hour by next April, representing a 4.1% increase from the current rate of £12.21 per hour. This increase will be the largest ever cash increase to the NLW, and will impact all staff aged 21+.

However, as the proposed new rate is based on factors including the cost of living, inflation forecasts, and the impact on the labour market, the actual rate could end up being anywhere from £12.55 per hour, to as high as £12.86 per hour.

Higher wages might help workers keep up with rising prices, but they also turn up the heat for employers. For hospitality venues, the pay bump lands on top of already eye-watering costs from inflation, energy, and rent increases.

And the ripple effects don’t stop there. When entry-level pay rises, supervisors and managers may expect an increase, too. While bigger pay packets give employees more financial breathing room, they may not be matched by higher customer spending, leaving businesses to absorb the extra costs without a boost in sales.

Will younger staff soon cost just as much?

In addition to raising the NLW, the LPC has suggested it may also close the £2 per hour wage discrepancy that currently exists for 18-20-year-olds. 

Currently, workers aged 18-20 are paid the National Minimum Wage (NMW) of £10 per hour, while over-20s are paid £12.21 per hour. By 2026, this gap could disappear. 

A recent poll by YouGov found that two-thirds of Brits feel that there should be no difference in pay for 18–20-year-olds and over-20s. Only one in five disagree with the changes and believe that pay should be lower for those aged 18-20.

Hospitality venues often rely on younger, lower-paid staff to keep wage costs manageable, so closing the pay gap could have a major economic impact on the sector.

Naturally, younger staff also tend to have less experience. With lower wages, hiring them is easier to justify. But if less experienced staff become more expensive, businesses may question whether it still makes financial sense to hire school leavers and students.

On the other hand, better pay could help entice more skilled workers back to an industry that’s been grappling with chronic labour shortages.

What hospitality businesses can do now

Only time will tell how the upcoming changes to the NLW and NMW will affect the hospitality sector. But employers can get ahead by acting now, reviewing staffing models, rota patterns, and margins well before April 2026 to ensure they’re prepared for the shift.

Running wage-impact scenarios can be a useful first step. For example, modelling how your profit and loss sheet would change if younger staff cost £2 more per hour. This not only highlights potential pressure points, but also informs decisions on staffing and pricing.

Think about how you might offset higher wage costs by making other parts of your business work harder, for example, improving customer experience and loyalty, cutting energy use, or using smarter rota scheduling so staffing matches demand.

Businesses that focus on retaining staff, investing in training, and improving efficiency will be best equipped to absorb higher wage bills and stay competitive in a changing market.