The National Living Wage will rise by 3.9% from April 2027, increasing from £12.71 to £13.21 an hour for employees aged 21 and over.
While that’s good news for employees, the cost to employers goes beyond the headline pay increase.
As wages rise, employers will generally pay more in National Insurance contributions and potentially workplace pensions too. There could also be pressure to increase salaries for employees already earning just above the minimum wage, particularly where businesses want to maintain pay differences between roles.
And with the personal allowance remaining frozen, employees won’t necessarily see the full benefit of the increase in their take home pay, as more of their earnings may be subject to income tax.
For businesses with larger teams, the additional employment costs could put further pressure on profit margins.
What does this mean for construction businesses?
If you’re working on fixed price contracts, you could find yourself paying more for labour without being able to increase what you charge your customers. That means a job you priced months ago might not deliver the profit you’d expected.
It’s worth reviewing your payroll costs and cash flow forecasts now, particularly if you’re pricing contracts that will run beyond April 2027.
If you’d like help understanding how the increase could affect your business, get in touch with the Progress team.
