CIPD consultation response: Low Pay Commission 2026 consultation

NLW impact on employers remains significant

Following the 4.1% NLW rise to £12.71 in April 2026, 66% of employers reported an increase in their wage bill (20% to a large extent, 32% to some extent, 14% to a small extent), similar to 2025 levels. Hospitality, retail and care remained the most affected sectors. 

Employers continue to absorb costs through multiple measures

The most common responses were raising prices (30%), accepting lower profits or higher overheads (28%), and improving efficiency/productivity (25%).

Employment and investment impacts are evident

Nearly a quarter of employers (23%) reduced employee numbers or recruited fewer workers, rising to 35% among those most affected. Around 16% scaled back investment plans, while 15% reduced training expenditure.

Productivity responses are widespread but uneven

One-quarter of employers sought productivity improvements, often through giving staff additional responsibilities, better business processes, morale initiatives, and greater use of AI. Large firms were more likely than SMEs to invest in automation. 

Pay compression remains a concern

Among employers affected by NLW increases, 25% reduced pay differentials between lower-paid workers and supervisors, particularly in retail, hospitality and care. Only 10% increased differentials.

Low-paid workers still face financial pressure

Despite NLW increases outpacing inflation, 39% of workers earning under £20,000 reported money worries affecting their work, and only 40% said they could meet all bills and commitments without difficulty.

CIPD recommends caution on future increases

It supports a maximum 3.7% NLW increase in April 2027 (£13.18) to maintain the target of around two-thirds of median earnings while limiting adverse impacts on employment, youth hiring, training and investment.