Elizabeth Bell (FCG Midwest)

Over the past 6 years the national living wage (21 and over / 23 and over) has increased by an average of 7.4% each year. Which equates to 52% in actual wages over the last 6 years!

The rises are designed to increase with or outpace inflation, although this often creates issues within smaller businesses. Additionally, the tax brackets have not moved for April 2026 so many will not see the full increase in their wages as they will have to pay more tax. The Government target is for National Living Wage to reach 66% of median earnings each year, alongside their economic strategy to increase productivity and reduce employee turnover.

The table above shows minimum wage over the past 6 years.

How much can minimum wage rise by in your business to still be profitable with your current staff?

I recently attended a meeting where we calculated that if we increased the herd size by 50, another member of staff would need to be employed, and the additional income from those 50 cows would cover the cost of the additional member of staff but not much else. This highlighted that we would need to significantly increase the herd to justify the expansion and additional staff.

Are you keeping additional cows that are just paying for an additional worker? Could you keep fewer, but more productive cows?

Employers’ National Insurance (NI) has also increased significantly since 2021. In 2021-22 someone who worked 40 hours per week on the minimum wage x 52 weeks = £1137 Employers NI. In 2026-27 for someone working the same hours, Employers NI = £3216, that’s a 282% increase!

Statutory Employers Pension contributions have also increased by £606 (using the above example) due to the increase in wages over the past 6 years.

Whilst minimum wage has increased by 52% over the past 6 years (7.4% per year), with pensions contributions and national insurance the true cost of employing someone has increased by 61% over the past 6 years (10.17% per year).

In our Cost of Production (COP) report (read here) that shows costs on a per cow basis, the average farm worker pay has increased by 7.9% year on year. This includes a calculation for unpaid labour at £30,000 per person per year. In the COP report for 2024-25 the top 10% of farms spent £393 per cow on labour whereas the bottom 10% of farms spent £833 per cow. It is important to note that contractors are more commonly used, as well as technology systems such as heat detection collars which will reduce labour input required, which suggests less staff on farm hence why it appears as if wages have not increased in line with the true cost of employing someone.

To review your employment costs and discuss where to optimise your spending, please contact your local FCG Office.