Minimum wage increases has pushed up cost on employers ‘by over £4,000’

Minimum wage increases brought forward by the Labour government have pushed up the annual cost of employing a single worker by over £4,000, new analysis has shown, adding to a mountain of cost pressures facing businesses. 

Estimates by the Centre for Policy Studies, a free-market think tank, found that between 2024 and 2027 the annual cost of employing a full-time worker on the minimum wage rose by at least £4,462. 

The rise in costs of hiring an 18 to 20-year-old have been higher, rising by £4,859 per year after the Labour government aimed to equalise wages between young people and other adults. 

The CPS has calculated that the businesses cost rise for some employees is 20 per cent as a result of minimum wage increases. 

The findings add to industry-wide backlash over the effects the government has had on the cost of business, with the British Chambers of Commerce stating that costs have risen by about 70 per cent over the last decade as a result of tax increases and higher minimum wages. 

Minimum wage increase splits public

Former Chancellor Rachel Reeves’ efforts to increase the minimum wage split businesses and unions. 

Employer groups including the Confederation of British Industry urged an independent salary-setting group, the Low Pay Commission, to consider costs for employers when deciding how far pay should rise for low-income workers, while unions called for consideration of the living pressures facing young people around the country. 

At this year’s Budget, John Healey opted to raise the minimum wage for under 21-year-olds by the same amount as the national living wage for adults amid concerns about youth unemployment and “trade-offs” between jobs and pay. 

Union chiefs, including Unison general secretary Andrea Egan, hit out at the Chancellor over his decision to delay closing the gap between minimum wages. 

CPS head of economic policy Daniel Herring said Healey deserved “some credit” for taking cost pressures on businesses into account “during an incredibly difficult period for them”. 

Herring said the “announcement of an increase follows a decade of above-inflation rises in the cost of employing someone on the minimum wage”. 

He added that costs on employers had risen by around double the level that inflation had risen since 2024.