20 | TECHNICAL
National minimum wage policy changes increasingly drive recruitment decisions
N ational minimum wage (NMW) number of entry-level roles they offer, with half intending to recruit experienced hires instead, RSM UK’s Workforce Survey found (https://ow.ly/VtfU50YYXtJ). The 18-20-year-old rate In April 2026, the 18-20-year-old NMW rate was set at £10.85, representing an 8.5% increase on the previous year. RSM’s research found that, as a result, 50% of changes are leading almost a third of UK businesses to reduce the employers are now looking to recruit more experienced hires, while 29% plan to reduce the number of entry-level roles within their organisations. These findings suggest that young people may find it harder in the future to secure a job. This is particularly true in retail, where just under half (48%) of employers intend to prioritise older, more experienced workers. Subsequently, those aged 18-20 may find it even more challenging to find that first or second job. The ‘concertina’ effect As NMW rates have increased at a faster pace than general wage inflation over the last few years, this has directly impacted the expectations of workers in roles positioned directly above colleagues on, or close to, the NMW. This arguably has a greater impact on those businesses with multiple pay grades than in those with flatter structures. Across many industries, employers have struggled to maintain meaningful pay differentials between roles. As a result, fewer employees are motivated to progress, perceiving that the additional pay doesn’t justify the increased responsibility and, in some cases, unpaid hours. This view is reflected in how many NMW checks are applied in payroll systems. In practice, roles with greater responsibility often involve additional unpaid hours,
which can offset any higher salary. As a result, some workers may require a ‘top-up’ to ensure their average pay meets the NMW, effectively leaving them paid at the minimum wage overall. And unfortunately, many businesses operate this way due to cost pressures. The history of the NMW rates These developments raise the question of whether we’re starting to come ‘full circle’ in the history of the NMW. In 2016, the national living wage (NLW) was introduced for workers aged 25 and over. Since then, that threshold has gradually reduced, first to 23 in April 2021, then to 21 in April 2024, with the longer-term intention that all workers aged 18 and above will receive the NLW for the hours they work. In many ways, the NLW was introduced to accelerate increases in minimum pay, with the younger age bands gradually moving into alignment over time. This will eventually leave us with just three rates: l the NLW l the 16–17-year-old rate l the apprentice rate. Interestingly, however, there have also been growing calls for sector-specific rates in industries such as social care. That raises the question of whether wage regulation could once again become more tailored by sector, echoing, in some respects, the system that existed before the National Minimum Wage Act 1998. Prior to 1998, there was no single statutory NMW rate. Instead, pay was shaped through various industry-specific wage-setting arrangements, many of which gradually lost influence alongside declining union activity and dwindling enforcement. I’m not suggesting that we are, or should be, going back to the pre-1998 framework, although there’s a lot I would change about the drafting of the current NMW regulations. Still, it’s interesting to consider whether
the conversation around different rates for different sectors represents a partial return to earlier approaches to wage regulation. Impacts of greater enforcement We saw a significant shift in the resources put into enforcing NMW from 2017/2018, in line with the inflation-busting increases to the rates. In 2018 through to Covid, a higher number of employers appeared to be able to pay above the minimum wage rates, even if only by a few pence. Many employers did this to provide a buffer due to concerns around staff working a few extra minutes, or there being an issue with deductions or uniforms. The reputational impact of being publicly ‘named and shamed’ by the Department for Business and Trade (DBT) was potentially a significant driver for this. Fast forward to today, and there are now fewer employers who can afford to pay that buffer, with many employers having to pay the minimum wage rate due to the squeeze on margins. This is in addition to many employers removing access to benefits offered through salary sacrifice arrangements, despite the significant value they can provide to lower-paid workers, because they reduce pay for NMW calculation purposes. Future enforcement It’s now been confirmed that ensuring compliance with the NMW (HM Revenue and Customs currently enforces NMW on behalf of the DBT) will move into the remit of the Fair Work Agency (FWA) from April 2027. The FWA has even greater powers than the NMW unit, including the ability to provide support to workers, and to seek costs for enforcement activity. It’s also likely that enforcement activity will increase from multiple directions. Alongside the NMW unit’s targeted initiatives (such as the ‘geographical compliance approach’ and the ‘employer support programme’), inspectors
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