21 July 2026
The Low Pay Commission (LPC) has published a report exploring what conditions would need to be met for the National Living Wage (NLW) to rise to a higher rate.
Rather than focusing on specific rates, this report responds to the Government’s 2025 remit, which asked the LPC to gather evidence and publish its findings on what the criteria would need to be met in order for the baseline target of the NLW rate to increase beyond the current two-thirds of UK median earnings.
The report notes that the NLW has helped raise pay and improve living standards for low-paid workers. Between 2016 and 2025, real weekly pay for NLW workers increased by around 20%. The Commission also states that there is little evidence of significant employment impacts at a national level from previous increases.
Importantly, the report is not asking whether the NLW should increase next year. Instead, it considers whether the current benchmark of two-thirds median earnings should remain the long-term destination for minimum wage policy, or whether there could be a more ambitious target in the future.
The LPC outlines several possible approaches:
- setting a new target above two-thirds of median earnings
- returning to a more flexible, qualitative approach without a fixed target
- combining both approaches by treating the two-thirds as a floor while retaining flexibility to respond to economic conditions.
Within the report, the LPC notes that, since its introduction in 1999, minimum wage policy has had different objectives over time, ranging from preventing exploitation and reducing pay inequality to improving living standards. Before considering any future target, the LPC believes the Government should be clear about its objectives and how minimum wage sits alongside wider employment, tax and welfare reforms.
The commission also notes that views remain divided on the future of the NLW. Worker representatives generally support a more ambitious future target, believing further increases could continue to improve living standards. Employer groups are generally more cautious, raising concerns about labour costs, affordability, pay differentials and wider economic pressures.
For pay professionals, the report offers an insight into how the conversation around minimum wage policy is evolving. Increasingly, discussions are moving beyond annual rate setting into broader themes such as living standards, workforce planning, pay progression, affordability and reward strategy. As a result, pay professionals are playing an increasingly important role in informing decisions that extend far beyond compliance alone, including reward design, employee financial wellbeing and business strategy.
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