The ONS put out fresh figures this morning. Regular pay grew 3.5% in the three months to June 2026. Add bonuses in and total earnings hit 4.1%. 

Good news if you’re on the receiving end of a payslip. Less straightforward if you’re the one signing it off, because this sits on top of a payroll structure that’s already been rebuilt twice in two years. 

April brought another National Living Wage rise. Before that, employer National Insurance went up and the threshold got cut. Sick pay and family leave payments have crept up as well. None of these moved in isolation, and none of them moved down. Payroll simply costs more than it did, and it got there gradually rather than in one hit. 

What the ONS Numbers Actually Show 

Regular earnings at 3.5% covers April to June 2026. Strip out inflation and you’re left with 0.5% growth in real terms. Employees are technically ahead of prices. Barely. 

The public-private split tells its own story. Public sector regular pay grew 6.1%, partly because of how NHS and teacher pay awards landed this year. Private sector came in at a more modest 2.8%. 

Inside the private sector, retail and hospitality topped the table at 3.5%. Finance and business services trailed at 2.3%. Construction actually shrank, down 0.1% on the year, the only sector still behind where it stood twelve months ago. 

There’s a second data source worth mentioning. HMRC’s Real Time Information figures put median monthly pay at £2,625 for May, up 4.6% year on year. This is the number that actually runs through payroll systems, and it’s the base employer NI gets calculated against. 

The National Living Wage Has Moved Again 

From 6 April, the rate for workers aged 21 and over went up to £12.71 an hour. A 4.1% rise on the year, and 11.1% higher than it was back in 2024. 

Younger workers saw a bigger jump. 18 to 20 year olds got 8.5%, taking their rate to £10.85. Apprentices moved to £8.00. 

The government’s aim is to eventually close the age-based gap altogether. Fine in principle. But for anyone running a mixed-age team in retail, hospitality or care, that means the wage bill keeps compounding year after year, and there’s no sign of it levelling off. 

Employer NIC: A Rate Rise and a Lower Threshold at the Same Time 

The April 2025 Budget changes are still working their way through 2026/27 budgets. Employer NIC went from 13.8% to 15%. At the same time, the Secondary Threshold, where employer NICs start applying, dropped from £9,100 to £5,000. 

Think about what that means together. A higher rate. Applied to a bigger slice of every salary. Not one or the other, both. 

Take someone on the UK average salary, roughly £36,000. That combination adds about £938 a year to what the employer pays. Scale that across a 20-person team and you’re looking at close to £19,000 in extra cost before a single pay rise has been given. 

Over 1.2 million UK employers are dealing with this right now. 

The Employment Allowance Went Up Too, Here’s the Catch 

Some relief did arrive. The Employment Allowance doubled to £10,500 for 2026/27, and the cap that used to shut larger employers out was scrapped. 

If you’re a small business with a light NIC bill, this can absorb most or all of the increase. Run a bigger payroll and it only chips away at part of the extra cost. 

It works month by month against your running NIC total. Hit £10,500 and standard rates kick back in for the rest of the year. Worth double-checking your accountant has this set up correctly, because getting it wrong, either missing it entirely or miscalculating the running total, is one of the more common ways PAYE gaps creep in. 

Want to know exactly where your employer NIC liability stands this tax year? Lanop’s payroll and accounting services handle payroll management and PAYE compliance as standard. 

The Angle Nobody’s Really Talking About: Wage Compression 

Here’s what happens when the National Living Wage jumps 4.1% in one go. The people just above it, supervisors, senior staff on £13 or £14 an hour, don’t move with it automatically. 

So the gap narrows. Sometimes it vanishes altogether. And that’s when experienced staff start asking why they’re carrying more responsibility for barely more money than the person they manage. 

Employers who only touch the statutory minimum and leave everything else untouched usually pay for it later, just not on the payslip. It shows up as turnover a few months down the line. Adjusting every pay band costs more up front, sure, but it’s usually cheaper than replacing people who walk. 

One survey this year found 20% of employers with a large National Living Wage workforce were freezing recruitment or holding back other pay rises just to create room in the budget. That’s not a footnote. That’s a structural squeeze on how teams get built. 

Statutory Sick Pay and Family Leave Also Changed 

From April, Statutory Sick Pay rose to £123.25 a week, up from £118.75. More significantly, the three-day waiting period disappeared entirely. Staff are now covered from day one of any illness. 

Maternity, paternity and adoption pay all moved to £194.32 a week, up from £187.18. 

Recovery rates matter here. Standard employers claw back 92% of statutory family pay from HMRC. Smaller employers, those with a total NIC bill under £45,000 the previous tax year, get 103% back. It sounds like a small administrative detail until your payroll software has the wrong rate applied, and then it’s a slow, annoying fix to unpick. 

Where This Leaves Employers 

Today’s figures confirm what’s been building for a while: wage growth is outpacing inflation, even if only just. This isn’t a one-off spike that settles down next quarter. Private sector pay awards are averaging around 3% for 2026, which is stable enough, but that stability sits on top of statutory changes that already reset the floor underneath it. 

For directors of smaller businesses, this often lands twice. Once through the business, in higher wages, higher NIC, higher statutory costs. And again personally, since the salary-versus-dividend calculation shifts every time these numbers move. If that’s you and you’re handling your own return, Lanop’s self assessment service is built with exactly this kind of year in mind. 

Payroll structure and personal tax efficiency are technically separate conversations. In practice they overlap constantly, which is the whole premise behind Lanop’s tax planning services for business owners. 

Treat each April change as a one-off and move on, and the cumulative weight of it tends to catch up eventually. The employers handling this well aren’t reacting each spring. They’re building payroll cost modelling into how they plan the year ahead. 

Lanop’s chartered accountants and tax advisors work with UK businesses on payroll compliance, employer NIC planning and director remuneration. If today’s numbers have raised questions about your own cost base, get in touch with Lanop.