The Impact of Minimum Wage Increases on Security Companies

The National Living Wage continues to rise year on year, with the government committed to reaching two-thirds of median earnings. For security companies where labour is typically 70-80% of costs, each increase has a direct and significant impact on profitability.

The Margin Squeeze

When minimum wage rises by 5%, your labour cost increases by 5% — but it’s not just the basic wage. Employer’s National Insurance, pension contributions, holiday pay, and sick pay are all calculated as percentages of the wage. A 50p per hour wage increase can add 70p or more to your total cost per guard hour once all on-costs are included.

If your contract rates don’t increase by the same amount, your margin shrinks. Over successive years of above-inflation minimum wage rises, margins that were comfortable become unsustainable.

The Client Conversation

Rate increase conversations are uncomfortable but essential. Approach them proactively: notify clients well before the increase takes effect, explain the statutory basis for the increase, present the impact transparently, and propose the adjusted rate with clear calculations. For guidance on structuring these conversations, see our article on pricing strategies for security guard services.

Most clients understand statutory cost increases if they’re communicated professionally and in advance. The companies that struggle are those that absorb increases until they’re in financial difficulty, then hit clients with a large catch-up increase that feels unjustified.

Strategic Responses

Beyond passing costs through, consider strategies to protect margins. Invest in workforce management tools that improve operational efficiency. Reduce administrative overhead through automation. Review shift patterns for optimisation — eliminating unnecessary overlap or reducing hours where the security need is lower. Explore hybrid solutions combining manned guarding with technology monitoring during lower-risk periods.

The Opportunity

Higher minimum wages also create an opportunity. Companies that were previously competing against very low-cost operators find the playing field levelling. When every company must pay at least the National Living Wage, differentiation shifts from price to quality and capability. Companies investing in technology, training, and professional standards find their premium positioning becomes more defensible as the cost floor rises.

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