The National Living Wage (NLW) and National Minimum Wage (NMW) are now due to rise by 3.9 per cent in April 2027.
It is often the case that payroll is one of the biggest expenses for employers, meaning that any increase can place significant pressure on working capital and profits.
While April 2027 may seem like a long way off, businesses should start planning for the increase now to avoid cash flow struggles come April.
How does the increase in the NLW and NMW affect businesses?
The new NLW and NMW wage rates will be as follows:
| Rate as of 1 April 2027 |
| 21 and over | £13.21 |
| 18 to 20 | £11.27 |
| Under 18 | £8.31 |
| Apprenticeship | £8.31 |
The continued increase in these rates is likely to create cash flow pressures for businesses, which include:
- Increased payroll costs
- Heightened National Insurance and pension payments
- Upward pressure on other pay bands for those not on the NLW and NMW rates
- Increased holiday costs
- Pressure on profit margins
Some of the most affected sectors include those that work predominantly with lower-paid workers, including care, hospitality, retail and manufacturing.
However, the wider impact on wages may be less obvious, as workers paid just above these rates may also request pay rises to reflect their roles.
What can I do to prepare?
The best way to prepare for an increase in the NLW and NMW is to conduct a cash flow forecast.
You should begin to review employment costs and run scenarios to establish what impact it will have on your operations after April 2027.
Additionally, businesses may need to consider if it may be appropriate to increase prices to cover staff costs or make cost savings in other areas, if possible.
Business owners should also consider how their competitors are responding to ensure that they retain talent, while managing costs.
It could also be beneficial to review staffing structures and identify areas that could be automated.
How can we help?
Receiving professional advice is the best way to ensure that your cash flow stays protected during a rise in NLW and NMW rates.
While April 2027 may seem like a while away, planning ahead is imperative to ensure that your business can adapt smoothly to an increase in NLW and NMW wage rates.
For support with cash flow forecasting, get in touch with our team.
