As the National Living Wage (NLW) increases today (1 April) to £12.71 per hour, new analysis shows that the true cost to retailers when paying the NLW is significantly higher at £17.37 per hour, which is 65p more than the previous year.
Research by the University of Stirling and the Scottish Grocers’ Federation (SGF), which factors in employer on-costs such as employer National Insurance contributions and holiday pay, alongside additional employment-related expenses including uniforms and administrative overheads, found that the true cost of employment equates to a premium to the NLW of £4.66 (37%).
Meanwhile, a recent survey of SGF members highlights the mounting pressure on the sector, with 100% of respondents stating they are unable to increase staff numbers or working hours due to rising costs. Additionally, more than three-quarters (77%) of retailers report that wage increases will have a significant or substantial impact on the viability of their business.
Over the past decade, the real business cost of employment has almost doubled (£9.28 in 2016 to £17.37 in 2026). As a result, retailers warn that higher staffing costs will inevitably be passed on to customers – many of whom are already facing financial pressure – while also leading to reduced opening hours and, in some cases, difficult decisions about whether stores can continue to operate.
Professor Leigh Sparks, University of Stirling, said: “A reduction in the number of people employed by the convenience store sector in Scotland as well as indications of reductions in labour input (hours worked) and hours of opening have recently been seen in national data. Whilst the increase in the National Living Wage (NLW) is a recent low, and there have been no further increases in employer National Insurance, fifteen years of austerity, the true cost of Brexit and recent, and likely future Trump-inspired, economic turbulence and inflation have made the Scottish convenience store sector cautious and concerned over costs and regulations.
“With the rising costs of labour, energy and store security it is extremely unlikely that sales and profit have been maintained at 2016 levels.
“Convenience stores often play more than a ‘simple’ shop role and are key assets and community “glue” providing facilities, services and spaces to combat social and economic inequalities and isolation. Understanding the true cost of employment and the consequences that decisions on wages and other employment and regulation aspects have, is thus an essential part of maintaining and growing this vital sector.”
SGF Chief Executive, Dr Pete Cheema OBE, added: “For a decade, we’ve exposed the gap between the headline National Living Wage and the real cost of employing staff – and that gap is only widening.
“Let’s be clear, Scottish retailers support fair pay, but policymakers cannot ignore the real and rising business costs created by above-inflation increases to the National Living Wage. Last year, retailers were hit with a double whammy – sharp wage rises combined with damaging increases to employer National Insurance costs.
“Instead of easing the pressure, governments have chosen to further add to the burden on retailers. The implications of this puts jobs, investment and the future of local businesses at risk.
“If governments are serious about promoting economic stability, supporting business investment and tackling increasing levels of unemployment, they must address the continued rise in employment costs and the impact this is having on small business growth.”
The Real Business Cost of Employment 2026 paper will form part of SGF’s annual submission to the Low Pay Commission consultation, for inclusion in its report and recommendations to the Prime Minister later this year.
Retail trade union, Usdaw, has welcomed the “much-needed” above-inflation 4.1% increase in the main minimum wage rate, along with a notably higher increase for younger workers, which the union deemed “progress towards ending rip-off youth rates”.
The union claimed that the increases took the “so-called” National Living Wage closer to the real Living Wage, helping close the gap on age-related pay.
New minimum wage hourly rates, from 1 April 2026:
· National Living Wage (over-21s): £12.71 (+ £0.50) (+4.1%)
· 18 to 20-year-olds: £10.85 (+ £0.85) (+8.5%)
· 16/17s and apprentice rate: £8 (+ £0.45) (+6.0%)
