Most businesses will have to adjust their wage structures in the wake of this April’s national minimum wage rises.
Organisations will have to consider the effect on employee retention and overall pay differentials, said an analysis by HR insight firm Brightmine.
Brightmine’s data shows nearly 60% of organisations will need to raise wages, with three-quarters expecting challenges around pay gaps between job levels.
From 1 April, 2025, the national living wage for those aged 21 and over will rise to £12.21 per hour, while the national minimum wage for 18-20 year olds will increase to £10 per hour and the rate for 16-17 year olds and apprentices will be £7.55 per hour.
Wages
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Businesses will need to head off the risk of employee friction over the changes, said Sheila Attwood, HR insights and data lead at Brightmine.
She added: “One of the key challenges is the impact on pay differentials, as lower pay bands catch up with the next job level.
“Nearly three-quarters (74.3%) of affected organisations expect pay differentials to be squeezed, which can create pay compression issues and potential dissatisfaction among more experienced employees.”
She said those organisations that had anticipated the changes were reviewing their pay structures, either by adjusting salaries across multiple levels, defining minimum differentials, or even reshaping their grading systems. “Others are exploring alternative solutions such as upskilling employees, offering bonuses, or enhancing benefits to retain staff and maintain motivation,” said Attwood.
“Employers need a clear strategy to manage these changes, ensuring they remain competitive while maintaining fair and structured pay progression.”
For companies looking to alter wage structures and increase pay, Recruitment and Employment Confederation chief executive Neil Carberry said that, based on poll results from February, business sentiment had improved this spring. This was despite the impact of the national insurance hike hanging over companies “like a fog”.
He said REC survey respondents were now optimistic about their intentions to hire permanent staff in the short term.
Carberry said employers “felt the most confident about medium-term permanent hiring (the next four to 12 months). Medium-sized organisations (50-249 employees) were clearly the most optimistic about permanent hiring”.
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