Over half of business expect staffing cost rise amid minimum wage increase

Recent data shows that more than half of UK businesses (55%) anticipate staffing costs to rise in the coming months. The findings highlight the growing pressure facing employers as the April increase to the National Living Wage approaches.

The latest Business Insights and Conditions Survey (BICS) from the Office for National Statistics (ONS) reported that businesses with 10 or more employees expect their staffing costs to climb over the next three months, with 41% saying they had already risen over the last three months. 

For many businesses that rely heavily on lower-paid staff, such as hospitality, the impact of the increase is likely to result in higher prices, operational changes or perhaps efforts to improve productivity with automation.

Staffing costs are rising

As of February 2026, 41% of businesses with at least 10 employees said their staffing costs had already increased over the past three months. That figure marks a 6% increase compared with November 2025 and is 5% higher than a year earlier.

Staffing costs include everything from direct wages and bonuses to more indirect costs like employer National Insurance and pension contributions, meaning increases can come from several sources at once.

From April, the main National Insurance rate paid by employers will increase from 13.8% to 15%, and the wage threshold at which they start paying is set to drop to £5,000. 

Simultaneously, the National Living Wage for workers aged 21 and over will rise to £12.71 per hour, which is a 50p (4.1%) increase. To put it in perspective, this means an employee will be paid £20 more per week before tax, if working a full-time 40-hour week.

The National Minimum Wage, for those aged 18-20, will also increase to £10.85 per hour, while apprentices and those aged 16-17 will be paid £8.00 per hour.

Hospitality among the sectors under the strongest pressure

Recent data showed that over half of hospitality businesses pay staff less than the Real Living Wage. Since the sector often relies heavily on hiring a high volume of younger, less experienced staff working on or near the minimum wage, increases to the legal rate will be felt strongly in this sector. 

There are also knock-on effects of wage increases, including salary compression, where employers are expected to not only raise the wages of those on the minimum wage, but also those of supervisors and managers, to keep wages proportionate.  

In addition, higher statutory wages will also result in higher hiring agency fees, which will impact restaurants, cafés and bars relying on flexible agency workers. 

Despite the pressure the increased costs will inevitably bring, employers must remain compliant, as reforms to the Employment Rights Bill will also introduce higher enforcement costs for employers as of April via the creation of a new Fair Work Agency (FWA).

What small businesses should do now

One way in which businesses may respond to the looming increase in staffing costs is to look for ways in which they can be more productive to save money. This might include reviewing staff scheduling to cover busier periods, and having fewer staff when it’s quieter. It may also be a great opportunity to look into potential tasks that can be automated, to save your team’s efforts on time-consuming, repetitive tasks.

Realistically, price increases may become necessary to offset wage increases. It helps to simultaneously make tangible improvements to help justify the increases for customers. They don’t have to be costly; instead, think about better service, loyalty perks, or small upgrades to the overall experience. 

It also always helps to transparently communicate with customers on the realities facing your business, rather than to try to hide price increases with tactics like “shrinkflation” or using lower-quality ingredients. 

On the brighter side, there are tangible benefits to paying staff a higher rate, such as attracting top talent and maintaining a higher sense of morale and engagement, which can translate into better service, productivity, boosted talent retention, and fewer absences. Over time, this can partly balance the cost of the upfront wage increase.