What If Labour Costs Keep Rising? Here’s What Hospitality Needs To Know

What if your wage bill went up 10% every single year, but your sales didn’t? That’s exactly what hospitality operators have been living through as the National Minimum and Living Wage climb year after year, on top of frozen National Insurance thresholds. It’s the same point I raised in my blog “Why Inflation Doesn’t Equal Growth” - revenue increases often don’t translate into profit once costs rise alongside them

In April 2021, when restrictions were finally lifted after Covid, the National Living Wage for over-23s was £8.91 an hour. For many operators it was a strange year, with booming sales as customers flooded back, but also heavy debts carried forward from months of closure.

Fast forward five years and look at what’s happened. By April 2024, the rate had climbed to £11.44. From April 2025 it’s set at £12.21 for everyone aged 21 and over. If the recent trend of 10% annual rises continues, then by April 2026 we’ll be looking at around £13.40 an hour.

That’s a jump from £8.91 in 2021 to £13.40 in 2026 – or a 50% increase in just five years.

For a full-time worker on 40 hours a week, that’s the difference between an annual gross wage of £18,500 in 2021 and almost £27,900 in 2026. A rise of more than £9,000 per employee per year. For a team of 10 full-timers, the wage bill is nearly £95,000 higher than it was when Covid restrictions lifted. And that’s before you even add employer National Insurance and pension contributions.

The other big structural change is the age banding reduction. The National Living Wage used to apply only from age 25. In 2021 it dropped to 23, and by 2024 it was down again to 21. That means younger staff who once sat in cheaper brackets now command the full adult rate. For businesses that relied heavily on younger workers such as students, part-timers, and entry-level staff, it’s added another 15–20% onto wage costs overnight.

And remember, the personal allowance and NI thresholds have been frozen since 2021. Every increase in pay drags more into taxable territory. Employers are paying higher secondary NI bills, while staff see less of the rise in their take-home pay. It’s a lose-lose: payroll bills are climbing steeply, but employees don’t feel better off.

So, what happens if this continues? Businesses are forced to cut shifts, shorten hours, and run leaner rotas. “I’ve paid £2 more per hour” doesn’t really tell the story. The real headline is this: since the end of Covid restrictions, the typical hospitality wage bill has risen by 40–50%, and operators are employing fewer people as a result.

Hospitality has always been a people business. But unless revenues grow at the same pace as wages - and for most independents they simply aren’t - the question isn’t if operators will have to make tough choices. It’s when.