Section A: Overview of Minimum Wage 2026
By law, employers are required to meet specific obligations in relation to workers’ pay under the National Minimum Wage provisions.
1. What is the National Minimum Wage?
The UK National Minimum Wage (NMW) is the legally mandated hourly wage that employers should pay their workers, ensuring fair compensation. The rate varies by age and employment status, including categories for adult workers, younger workers and apprentices. It applies to most workers, including part-time, full-time, temporary and casual staff.
Minimum wage rates are set by the UK Government and are reviewed annually, which typically results in increased rates each April.
Employers should ensure they are aware of any changes in rates and adjust their payroll accordingly.
Importantly, the NMW is a floor and other contractual or collective arrangements can go above the relevant rate, but never below it.
2. Minimum Wage Rates 2026
From 1 April 2026, the National Living Wage for workers aged 21 and over will be £12.71 per hour, a 4.1% increase on the 2025 rate. The 18 to 20 National Minimum Wage will rise to £10.85 per hour, an 8.5% uplift, while the 16 to 17 and apprentice rates will increase to £8.00 per hour. These changes continue the policy of narrowing gaps between youth rates and the adult National Living Wage.
| NMW Rate 2026 | Rate from 1 April 2026 (£) |
|---|---|
| National Living Wage (21 and over) | £12.71 |
| 18–20 Year Old Rate | £10.85 |
| 16–17 Year Old Rate | £8.00 |
| Apprentice Rate | £8.00 |
| Accommodation Offset | £11.10 |
From 1 April 2025, the NLW for workers aged 21 and over is £12.21 per hour, a 6.7% increase on the previous rate. For younger workers, the NMW saw substantial raises, with the 18 to 20 age group rate increasing by 16.3% to £10.00 per hour and the 16 to 17 age group and apprentice rates both rising by 18% to £7.55 per hour. The accommodation offset rate, an allowable deduction for employers providing accommodation, also increased by 6.7% to £10.66 per day.
| NMW Rate 2025 | Rate from 1 April 2025 (£) |
|---|---|
| National Living Wage (21 and over) | £12.21 |
| 18-20 Year Old Rate | £10.00 |
| 16-17 Year Old Rate | £7.55 |
| Apprentice Rate | £7.55 |
| Accommodation Offset | £10.66 |
3. Who Qualifies for the National Minimum Wage?
A wide range of workers across different employment types are entitled to the UK minimum wage, including full-time and part-time employees, apprentices, casual and temporary staff and those on zero-hours contracts. Agency workers, agricultural workers and workers paid by the number of items they make (piece workers) are also entitled to the minimum wage.
Domestic workers, such as cleaners and carers, whether they work in their employer’s home or elsewhere, are also entitled to receive the minimum wage unless they are treated in law as a member of the employer’s family.
The National Minimum Wage applies equally to workers regardless of whether they are permanent or temporary.
Some office holders may be outside scope depending on the relationship, but directors who are also workers or employees can be entitled to the minimum wage.
Examples of individuals who are not covered by minimum wage regulations include those who are genuinely self-employed, volunteers, members of the armed forces, people who are work shadowing and those under school leaving age. Some office holders may be outside scope depending on the relationship, but directors who are also workers or employees can be entitled to the minimum wage.
4. What is the National Living Wage?
The UK National Living Wage is the mandatory minimum hourly pay for workers aged 21 and over, designed to ensure fair compensation reflecting living costs and economic conditions.
5. Who Qualifies for the Apprentice Rate?
Workers are entitled to receive at least the apprentice rate if they are an apprentice and are either under 19 years old, or 19 or older and in the first year of their current apprenticeship agreement.
Those who are 19 or older and have completed the first year of their current apprenticeship should be paid at least the minimum wage for their age group.
DavidsonMorris Strategic Insight
Significant uplifts in minimum wage rates, particularly for younger workers and apprentices, are pushing sustained cost pressure, especially into entry-level, labour-intensive sectors such as care, retail and hospitality. Early announcements give some planning runway but they also lock employers into a steep, multi-year wage trajectory.
Section B: Legal Requirements for Employers
Ensuring compliance with minimum wage laws is a legal obligation for all UK employers. These rules are designed to protect workers’ pay, and employers are expected to keep accurate records, apply the correct rates and address any underpayments quickly and transparently.
1. Legal Framework
The legal framework governing the UK National Minimum Wage is established through several key pieces of legislation. These laws define how the minimum wage works, how it is calculated and how it is enforced.
a. National Minimum Wage Act 1998
The Act introduced the statutory minimum wage and set out the legal requirement for employers to pay their workers at least the minimum hourly rate. It also establishes the structure for calculating the minimum wage.
b. Employment Rights Act 1996
This legislation sits alongside the NMW framework and provides routes to recover unlawful deductions from wages.
c. National Minimum Wage Regulations 2015
The Regulations provide detailed rules on how the minimum wage should be calculated, including how it applies to apprentices, piece workers, salaried hours workers and those on zero-hours arrangements. They also outline record-keeping expectations and the consequences of non-compliance.
d. National Minimum Wage (Amendment) Regulations
Deductions should not take a worker’s pay below the minimum wage unless the law allows it. The minimum wage calculation is carried out on gross pay before income tax, National Insurance and certain other statutory deductions, so those deductions can reduce take-home pay without affecting compliance with the minimum wage rules.
Accommodation is treated differently. It is the only benefit in kind that can be taken into account positively when checking minimum wage compliance, through the accommodation offset. If an employer charges more than the permitted accommodation offset, the excess is treated as a deduction that reduces pay for minimum wage purposes. Other benefits in kind, such as meals, travel or staff discounts, do not count towards minimum wage pay at all.
e. Low Pay Commission
The Low Pay Commission is the independent body that advises the Government on appropriate minimum wage rates. It gathers evidence from employers, workers and representative bodies and recommends rates that balance fair pay with economic conditions.
f. Enforcement and Compliance
HM Revenue and Customs is responsible for enforcing minimum wage compliance. HMRC investigates suspected breaches, can require employers to repay arrears and can issue penalties of up to 200 percent of the underpayment, capped at £20,000 per worker. Employers who underpay risk being named publicly by the Government.
2. Legal obligations for UK employers
UK employers are required to pay each worker at least the statutory minimum wage that applies to their age or apprentice status. That obligation is not optional and it is not softened by local market conditions or what a worker has agreed to accept. The correct rate needs to be applied from the first pay reference period that starts on or after a statutory increase, or from the first period after a worker moves into a higher age band or completes the first year of an apprenticeship where that changes the rate.
Meeting those obligations in practice depends heavily on accurate records. Records should be kept for long enough to demonstrate compliance across pay reference periods and to respond to any HMRC enquiry. Many employers retain these records for at least six years as a risk management measure. Those records should allow someone outside the organisation, such as an HMRC officer, to reconstruct what a worker was paid for a particular period and how that compared against the applicable minimum wage. They should also capture any deductions made from pay and the reasons for them, so there is a transparent trail if questions are raised later.
The contractual framework and routine documentation need to support compliance as well. A written statement of employment particulars should set out the worker’s pay arrangements, including the rate of pay and how it is calculated. Itemised payslips should then show gross pay, each deduction and the net amount actually paid. Where the payslip narrative is vague or inconsistent with the contract, it becomes harder to show that the minimum wage has been respected across different pay reference periods.
Deductions from pay require particular care. Deductions are not allowed to take a worker’s pay below the minimum wage unless the law permits it. The minimum wage calculation is done on gross pay before income tax, National Insurance and certain other statutory deductions, so those can legitimately reduce take-home pay without breaching the minimum wage rules. Accommodation is treated differently. It is the only benefit in kind that can be taken into account positively when checking minimum wage compliance, through the accommodation offset. If an employer charges more than the permitted accommodation offset, the excess is treated as a deduction that reduces pay for minimum wage purposes. Other benefits in kind, such as meals, travel or staff discounts, do not count towards minimum wage pay at all.
Finally, employers should carry out regular reviews of wage rates and worker status. Each year’s increase in minimum wage rates needs to flow through correctly to payroll, but so do individual changes when workers move into higher age categories or when apprentices become entitled to age-related rates. Those changes should be picked up from the next pay reference period, not left until an annual pay review or performance cycle. A simple internal timetable that aligns statutory uprating dates, birthdays, apprenticeship milestones and payroll cut-offs will make it easier to show that the organisation has taken its minimum wage obligations seriously and applied the correct rate at the correct time.
3. Consequences of Non-Compliance
Employers who fail to pay the correct minimum wage can be required to repay arrears to each affected worker and pay a financial penalty of up to 200 percent of the underpayment, capped at £20,000 per worker. Arrears are calculated at the current minimum wage rate, not the historical rate at the time of the underpayment.
The Government may also publish the names of employers who have underpaid, leading to reputational and recruitment risks. Workers can bring tribunal claims for underpayment, which can result in further costs and compensation. Serious or repeated breaches may lead to criminal enforcement action.
DavidsonMorris Strategic Insight
HMRC is now looking beyond obvious underpayments, and cases now often turn on technical breaches, usually buried in payroll settings or contract wording. Inspectors look closely at processes and systems, such as how you classify workers, how you treat allowances and deductions, how birthdays and apprentice milestones are tracked and how queries are resolved or escalated.
Section C: How to Calculate Minimum Wage for Different Types of Work
While the National Minimum Wage is calculated based on an hourly rate, it applies to all eligible workers regardless of how they are paid or how their pay is usually calculated. Employers need to be able to work out an equivalent hourly rate to confirm that each worker is receiving at least the applicable minimum wage.
There are different methods for verifying that workers receive the minimum wage, depending on their payment structure.
1. Paid by the Hour
For workers paid by the hour, known as ‘time work’, calculating the minimum wage is relatively straightforward. Employers should ensure that the hourly rate paid meets or exceeds the National Minimum Wage or National Living Wage, depending on the worker’s age and status.
To calculate the rate, divide the total earnings by the number of hours worked within the pay reference period.
2. Paid an Annual Salary
For workers paid an annual salary under a contract for a basic number of hours each year, known as ‘salaried hours work’, employers should ensure the total salary equates to at least the minimum wage for all hours worked.
Calculate the hourly rate by dividing the annual salary by the total number of contracted hours for the year. The resulting rate needs to meet or exceed the minimum wage.
3. Paid per Task or Piece of Work Done
For workers paid per task or piece of work done, referred to as output work, employers should ensure that workers earn at least the minimum wage. To calculate the equivalent hourly rate, employers can either:
a. Pay a fair piece rate: Set the rate per task at a level that allows an average worker to earn at least the minimum wage per hour. Where actual hours are not recorded, specific statutory rules apply and the piece rate usually needs to be set so that an average worker can earn at least 120 per cent of the applicable minimum wage.
b. Conduct a test: Measure the time taken for each task and ensure the total pay for all tasks completed meets the minimum wage for the hours worked, based on records of actual hours.
4. Paid in Other Ways (Unmeasured Work)
For workers paid in other ways, known as unmeasured work, employers should estimate the number of hours typically worked and ensure the pay meets the minimum wage for those hours. This may involve keeping detailed records of hours worked or agreeing a daily average agreement with the worker, setting out the typical number of hours they are expected to work each day.
Any daily average agreement should be in writing, agreed in advance and kept with the pay records so that it can be produced if HMRC reviews minimum wage compliance. The total pay for the pay reference period is then divided by the agreed number of hours to check that the resulting hourly rate meets or exceeds the minimum wage.
It is advisable to use the government’s National Minimum Wage calculator to verify compliance with the regulations in relation to unmeasured work.
5. What is ‘Working Time’?
When calculating working time for minimum wage purposes, employers should include time spent at work when the worker is required to be working or on standby near the workplace, excluding rest breaks. Time spent not working due to machine breakdowns while the worker remains at the workplace, or time spent waiting to collect goods, meet someone for work or start a job, also counts.
Travel that forms part of the job, including moving between work assignments, should be included, as should time spent training or travelling for training.
Where suitable sleeping facilities are provided, the mere fact that a worker is required to remain on the premises overnight does not mean the whole shift counts as working time for minimum wage purposes.
Time spent travelling between home and the normal place of work, rest breaks away from work, holidays, sick leave, maternity leave and periods of industrial action are not counted as working time for minimum wage purposes.
DavidsonMorris Strategic Insight
The further your pay model moves away from simple hourly rate times hours worked, the higher your risk. Salaried hours contracts, annualised hours, complex overtime arrangements, commission and allowances can all skew the effective hourly rate if your payroll rules are not mapped to the National Minimum Wage categories. HMRC will not treat “industry practice” as a defence. Inspectors will rebuild a worker’s pay reference period hour by hour using your own rotas, timesheets and diaries. If those records are inconsistent, they are likely to read that as underpayment and calculate arrears and penalties on that basis.
Section D: Implementing Increases in National Minimum Wage
National Minimum Wage changes are not only about updating a rate card once a year. Employers are expected to change pay correctly, at the right time and for every affected worker. That means systems, contracts and data all moving together. Where implementation goes wrong, underpayments can build quietly over several years and then surface as a large arrears bill when HMRC reviews your records. A planned, documented approach to each increase, and to individual changes in eligibility, reduces the scope for error and supports a strong audit trail if the organisation is ever challenged.
1. When wage increases take effect
Workers become entitled to higher minimum wage rates in two main situations. The first is when the statutory rates go up on 1 April each year. The second is when a worker’s personal circumstances change, for example when they move into a higher age band or complete the first year of an apprenticeship. Employers need clear rules and reliable data so that both types of change are captured in time for the correct pay reference period.
a. Annual NMW increases
Government changes to minimum wage rates take effect on 1 April each year. Employers are expected to apply the new statutory rate from the first pay reference period that starts on or after that date. The pay reference period is the stretch of time that a particular payment covers, such as a week or a month, and it cannot be longer than one month.
In practice, this means the effective date for the new rate depends on your pay cycle. For example, if you pay monthly on the last working day of the month and your pay reference period runs from the first to the last day of the month, the new rate applies to the full April pay month. If you pay weekly on a Friday and your pay week runs from Saturday to Friday, the rate applies from the first pay week that begins on or after 1 April. Payroll settings need to reflect these patterns, rather than assuming the same switch-over date for every worker.
b. Worker’s age
Workers become entitled to a higher minimum wage when they move into a new age band. The key points for most employers are the step-up at age 18 and the point at which a worker becomes entitled to the National Living Wage at age 21. A system that relies on local managers to spot birthdays is unlikely to hold up well in an HMRC review. Central payroll and HR records should track dates of birth and trigger automatic changes.
For apprentices, the position is more nuanced. The apprentice rate applies to those under 19, and to those aged 19 or over who are still in the first year of their current apprenticeship agreement. Once an apprentice turns 19 and has completed the first year of that apprenticeship, they should move to at least the minimum wage rate for their age group. Where an apprentice is already 19 when they finish the first year, the increase in rate can be significant, so it is important that the transition point is clearly recorded.
The higher rate applies from the start of the next pay reference period after the birthday or apprenticeship milestone. This means the increase does not always take effect on the exact date of the change. Employers need to be able to show, if asked, how the pay reference period has been defined and how the rate change was applied in the first period that followed.
c. Pay reference period
The pay reference period underpins all minimum wage calculations. It is the period over which pay and hours are compared to check that the worker has received at least the correct hourly rate. It will mirror the way the worker is paid, for example weekly or monthly. A pay reference period can never exceed one month, even where an employee is paid less frequently for other reasons.
Employers should document pay reference periods clearly within their payroll procedures and ensure any exceptions are justified and consistent. During an HMRC review, inspectors will test whether the organisation is applying the correct rate in the correct period, so confusion about when a period starts and ends can easily turn into an underpayment finding.
2. Adjusting payroll systems
Once the new minimum wage rates and any age or apprenticeship changes are known, the next task is to ensure your payroll system and associated processes are aligned. A rushed or informal update creates a high risk of small errors in configuration that affect dozens or hundreds of workers at once. A structured review, testing phase and sign-off process is more reliable and provides evidence that you approached implementation carefully.
Begin by assessing your current payroll set-up. Identify where minimum wage rates are stored, how worker categories are defined and how deductions are configured. Check how birthdays, apprentice progression and changes in contractual hours are handled. This diagnostic step gives you a clear picture of which parts of the system need updating before the new rates apply.
Update all minimum wage rates in line with the latest statutory figures and ensure the correct rates are assigned to each category. Adult workers, younger workers and apprentices may be set up under different pay codes, so you need to trace those codes through the system rather than assuming a single global change will be sufficient. Where you operate different payrolls or software instances across group companies, each one needs to be reviewed and updated.
Once the new rates are in place, carry out test runs to confirm that calculations work as expected. Tests should cover standard hours, overtime, enhancements, allowances and any common deductions. The aim is to confirm not only that the basic pay rate is correct but also that the effective hourly rate remains above the minimum once regular deductions and patterns of work are taken into account. Catching errors at this stage is far easier than trying to unpick them after the first live payroll run.
Payroll staff may need training on the updated processes and rates. Provide clear internal guidance that explains which rates apply to which categories, how birthdays and apprenticeship milestones are handled and how to escalate queries. Where HR, line managers or finance teams input data that feeds into payroll, they also need to understand the new rules so that instructions sent to payroll are accurate.
Employee records should then be updated to reflect the new rates and any individual eligibility changes. Workers should be informed of their new pay rate in a clear and timely way, whether through updated contracts, variation letters or standard pay review communications. Transparent communication reduces disputes later and reassures staff that the organisation is applying the statutory changes correctly.
After implementation, ongoing monitoring is important. Reports that compare pay rates against minimum wage thresholds, spot-checks on sample payslips and periodic internal audits all help to identify any issues early. This level of oversight reduces the risk of unnoticed underpayments building up over many pay cycles.
3. Timeline for implementing changes
Treating minimum wage uprating as a short project each year makes implementation more manageable. A clear timeline with defined phases helps the organisation move from planning to go-live in a controlled way, rather than rushing to update settings days before the new rates apply.
a. Preparation phase (3 months before implementation)
Around three months before the new rates take effect, review the payroll system and associated processes. Identify where rates and categories are held and where changes are likely to be needed. Consider whether existing software is still fit for purpose, particularly if you have introduced new work patterns, allowances or bonus structures since the last review. Plan training and internal communications so that everyone involved in payroll input and approval understands that changes are coming.
b. Update and testing phase (2 months before implementation)
Two months out, start to implement the new rates in a controlled way. Update pay codes, rate tables and any formulae that rely on minimum wage thresholds. Run detailed tests across a range of scenarios, including standard workers, apprentices, different age groups, zero-hours arrangements and workers with regular overtime or allowances. Document any corrections and retest until you are confident the system is calculating pay correctly.
c. Final adjustments and communication phase (1 month before implementation)
In the final month before the new rates apply, make any remaining adjustments identified during testing. Lock down changes to prevent last-minute, undocumented edits that could undermine your work. Update employee records with new rates and prepare communications to staff explaining the changes in clear terms. Payroll teams may need additional support at this stage, as they will be handling queries and finalising data for the first pay reference period that will use the new rates.
d. Implementation phase (implementation date)
On the implementation date, move to the updated payroll configuration and run the first live payroll cycles under the new regime. Monitor results closely, reviewing sample payslips and reports to check that the right workers have moved to the right rates and that no categories have been missed. Any issues should be documented and corrected promptly, with clear records kept of the steps taken.
e. Post-implementation phase (1–3 months after implementation)
In the first few months after the change, continue to monitor payroll outcomes and worker feedback. Carry out a structured post-implementation review to identify any weaknesses in data, processes or system design that came to light during the changeover. Adjust your checklist and project plan for the following year based on these findings. This approach creates a cycle of continuous improvement, reducing the risk of recurring underpayments and building confidence that the organisation is handling minimum wage obligations in a reliable and defensible way.
DavidsonMorris Strategic Insight
The uplifts every April, as well as birthdays and apprentice progression dates all require payroll and HR systems to be aligned. These are exactly the kind of situations HMRC tests during reviews. Approach NMW uprating as a small project each year, with a formal checklist, test payroll runs and sign-off, rather than relying on automated software updates and hoping, or assuming, nothing is missed.
Section E: Budgeting and Financial Planning
Minimum wage increases can affect payroll costs across an organisation, so employers should take a planned approach to budgeting and financial management. Preparing early helps absorb increased wage costs while maintaining business stability and operational efficiency.
1. Budgeting to Accommodate Wage Increases
Begin by reviewing the existing budget to identify where adjustments can be made to cover higher wage costs. Allocate additional funds where required so that all departments are accounted for. Cost-control measures may also be necessary. Focus on improving efficiency without compromising service delivery, such as through renegotiated supplier contracts, improved energy management or reductions in non-essential spending.
Consider opportunities to increase revenue to help balance rising wage costs. Pricing strategies may need to be reviewed where commercially viable, and any price changes should be assessed for their impact on customer demand. Introducing new products or services can help diversify income, creating additional revenue streams to support increased labour costs.
Improving employee productivity can also support financial resilience. Training and development can raise efficiency and performance levels. Performance-linked incentives can help motivate staff and ensure that wage increases are supported by strong output and service quality.
2. Adjustments in Financial Forecasting
Update financial forecasts to reflect higher wage costs. This involves revising income statements, cash flow statements and balance sheets to incorporate the increased expenditure. Scenario analysis is helpful in planning for different operating conditions, such as varying sales levels or cost pressures, so that the business can anticipate financial risks.
Monitor key financial indicators closely. Keeping track of profit margins helps ensure the business remains financially sustainable. Break-even calculations can show the level of sales required to absorb increased wage costs. These insights support informed decisions on pricing, budgeting and cost management.
Review capital expenditure plans to determine whether any non-essential investments can be postponed. Prioritise projects that support core business activity or generate strong returns. Where major expenditure is unavoidable, consider financing options such as loans or leasing arrangements to preserve cash flow.
3. Managing Cash Flow
Develop regular cash flow forecasts to anticipate upcoming expenditure and ensure sufficient funds are available to cover wage increases. These forecasts should be updated frequently to reflect changing business conditions. This forward-looking view helps identify potential shortfalls and allows early intervention.
Strengthen receivables management by ensuring invoices are issued promptly and supported by consistent follow-up on late payments. Clearer credit controls can reduce payment delays and improve cash flow. On the payables side, negotiate longer payment terms where appropriate to ease short-term cash pressure, while maintaining strong supplier relationships.
Setting aside a cash reserve can help absorb unexpected costs or fluctuations in earnings. A reserve equal to several months of operating expenses provides valuable protection during periods of financial uncertainty and supports business continuity.
DavidsonMorris Strategic Insight
If a high proportion of your workforce is near the minimum rate, every annual uplift will trigger a reaction somewhere in the business, like budgets, headcount or even staff expectations and morale. The organisations that cope best will be using NMW forecasting as a trigger to rethink creatively rather than defaulting to cutting hours or benefits. They also develop a clear, credible narrative for investors, boards and unions about how increased wage costs will be funded without undermining service delivery or creating compliance gaps in other parts of the operation.
Section F: Debunking Common Myths About the National Minimum Wage
The National Minimum Wage is governed by detailed legislation, but misunderstandings remain common. These misconceptions can lead employers to take decisions that risk underpayment, compliance failures or disputes with workers. Addressing the most frequent myths helps employers apply the rules correctly and avoid issues that arise from assumptions rather than the legislation itself.
Myth 1: Only Full-Time Workers Are Entitled to the Minimum Wage
The National Minimum Wage applies to all workers, regardless of whether they are full-time, part-time, casual or temporary. This includes apprentices, trainees, agency workers and individuals engaged on zero-hours contracts.
Myth 2: The Minimum Wage Is the Same Across All Age Groups
The minimum wage varies depending on the age of the worker and their apprentice status. Younger workers and first-year apprentices have different statutory rates.
Myth 3: Employers Can Include Tips and Service Charges to Meet the Minimum Wage
Tips, gratuities and service charges cannot be counted towards minimum wage pay. Employers should pay the full minimum wage as base pay, with tips treated separately.
Myth 4: Small Businesses Are Exempt from Paying the Minimum Wage
All employers, regardless of size or sector, are required to comply with minimum wage legislation. There are no exemptions for small or family-run businesses.
Myth 5: Family Members Working in a Family Business Are Not Entitled to the Minimum Wage
Family members who work in a family business should be paid at least the minimum wage if they have a formal employment relationship or receive payment for their work. Only those who are genuinely self-employed may fall outside the rules.
Myth 6: Apprentices Only Need to Be Paid the Apprentice Rate for the Entire Apprenticeship
The apprentice rate applies only to apprentices under 19, or to those aged 19 or over who are in the first year of their current apprenticeship. After the first year, apprentices aged 19 or over should be paid the minimum wage rate for their age band.
Myth 7: The Minimum Wage Only Applies to Certain Jobs or Industries
The minimum wage applies across almost all jobs and industries in the UK. There are limited exceptions, and employers in every sector should ensure they meet the statutory rates.
Myth 8: Workers Can Agree to Be Paid Less Than the Minimum Wage
Any agreement to be paid less than the minimum wage has no legal effect. Employers should pay at least the statutory rate even if a worker suggests otherwise.
Myth 9: Employers Can Deduct Uniform Costs from the Minimum Wage
Uniform costs have to be taken into account when checking minimum wage compliance. If uniform or other work-related costs reduce a worker’s effective pay below the minimum wage, the employer is in breach of the rules. Only certain statutory deductions, such as income tax and National Insurance, are ignored for minimum wage calculation purposes.
Myth 10: The Minimum Wage Only Needs to Be Paid After a Certain Length of Service
Workers are entitled to receive the minimum wage from their first day of employment. There is no qualifying period before entitlement takes effect.
Section G: Summary
The National Minimum Wage framework is now driving sustained and significant uplifts in pay through 2025 and into 2026, particularly for younger workers and apprentices, as the gap with the adult National Living Wage continues to narrow. For employers, the legal duty is straightforward on the face of it, yet the execution is where exposure arises. You are expected to know which rate applies, from which date, for which worker, and to evidence that you have paid it.
Compliance is no longer just a payroll issue. It touches recruitment, contracts, scheduling and budgeting. Mistakes can run for years before they are picked up, at which point arrears, penalties and public naming all arrive at once. Robust processes around working time, age bands, apprentice status and the accommodation offset, supported by accurate records and tested systems, are now a baseline expectation rather than best practice.
Used properly, the statutory rates and guidance give a clear structure for lawful pay. The real task for employers is to embed those rules into everyday decision making, so that annual rate rises, age-related changes and new starters are all captured automatically. That approach reduces the risk of HMRC enforcement, supports workforce morale and gives leadership better visibility over the true cost of labour as the 2025 and 2026 increases take effect.
Section H: Need Assistance?
As employer solutions lawyers, our employment law experts are on hand to answer any questions you may have about changes in the national minimum wage and complying with your pay-related obligations. For specialist advice, book a fixed-fee telephone consultation with us and speak to an employment law adviser.
Section I: FAQs
What were the minimum wage rates from April 2024 to March 2025?
From 1 April 2024 to 31 March 2025, workers aged 21 and over were entitled to at least £11.44 per hour under the National Living Wage. The National Minimum Wage was £8.60 per hour for workers aged 18 to 20, £6.40 per hour for workers under 18 and £6.40 per hour for apprentices under 19 or those in the first year of their apprenticeship.
What are the minimum wage rates from April 2025?
From 1 April 2025, the National Living Wage for workers aged 21 and over is £12.21 per hour. The National Minimum Wage is £10.00 per hour for workers aged 18 to 20, £7.55 per hour for workers aged 16 to 17 and £7.55 per hour for apprentices under 19 or those in the first year of their apprenticeship.
What will the minimum wage rates be from April 2026?
From 1 April 2026, the National Living Wage for workers aged 21 and over will be £12.71 per hour. The National Minimum Wage will be £10.85 per hour for workers aged 18 to 20, and £8.00 per hour for workers aged 16 to 17. The apprentice rate will also be £8.00 per hour for apprentices under 19 or those in the first year of their apprenticeship.
When do the minimum wage rates come into effect?
New statutory minimum wage rates usually take effect on 1 April each year. Employers are expected to apply the new rates from the first pay reference period starting on or after that date. The same approach applies when a worker moves into a higher age band or an apprentice becomes entitled to the age-related rate.
How do I update my payroll system to reflect the latest rates?
You should review the current rates used in your payroll system, update them in line with the new statutory figures and test that calculations work correctly. Payroll staff may need training on the new rates and processes. You should also update worker records and communicate any pay changes clearly so that staff understand how the new rates affect them.
What are the legal consequences of not complying with minimum wage rates?
Non-compliance can lead to enforcement action by HMRC. Employers can be required to repay arrears to affected workers and may be issued with a penalty of up to 200 percent of the underpayment, capped at £20,000 per worker. The Government can also publish the names of underpaying employers, workers can bring claims in the tribunal and serious cases may result in criminal proceedings.
What if I need professional advice to manage wage changes?
You can contact DavidsonMorris for guidance on applying the latest minimum wage rates, updating payroll systems and managing any risks identified in your current arrangements. Our employment law specialists advise on pay compliance as part of wider workforce, budgeting and risk management strategy.
Section J: Glossary
| Term | Definition |
|---|---|
| Apprentices | Individuals in a training programme that combines practical work experience with formal education. Apprentices are often paid at a lower wage rate during their training period, subject to the statutory apprentice rate and age-related minimum wage rules. |
| Department for Business and Trade (DBT) | The UK government department responsible for business regulation and labour market policy, including oversight of minimum wage policy and the work of the Low Pay Commission. |
| Break-Even Analysis | A financial calculation used to identify the level of sales at which total revenue equals total costs so that the business makes neither a profit nor a loss. |
| Cash Flow | The movement of money into and out of a business over a given period, often used to assess whether the business can meet its short-term financial obligations. |
| Compliance | Adhering to laws, regulations and guidance. In the minimum wage context, it means ensuring all eligible workers are paid at least the legal minimum rate for their age or status. |
| Deductions | Amounts taken from a worker’s gross pay, such as income tax, National Insurance, pension contributions or other authorised sums. Some deductions can affect minimum wage calculations. |
| Financial Forecasting | The process of estimating future financial outcomes by analysing historical data, current trends and expected business activity, often used to plan for wage increases and other cost changes. |
| HR (Human Resources) | The function within a business responsible for recruitment, employee relations, payroll, benefits and compliance with employment law, including correct application of minimum wage rates. |
| Living Wage | A wage level that is higher than the statutory minimum wage and is based on the cost of living so that workers can afford a basic standard of living. It is promoted by the Living Wage Foundation rather than set by law. |
| Minimum Wage | The lowest legal hourly pay that employers are required to pay eligible workers. Statutory minimum wage rates vary by age and employment status, including apprentices. |
| National Living Wage | The statutory minimum wage rate that applies to workers aged 21 and over in the UK. It is set with reference to median earnings and is higher than the youth rates. |
| PAYE (Pay As You Earn) | The system through which employers deduct income tax and National Insurance contributions from workers’ pay and send them to HMRC. |
| Payroll System | The processes and software used to calculate, pay and report workers’ wages and deductions. It supports compliance with minimum wage, tax and reporting rules. |
| Profit Margins | A measure of profitability, usually calculated as net income divided by revenue, showing how much of each pound of income is retained as profit after costs, including wages. |
| Scenario Analysis | A planning tool that looks at different possible future situations, such as varying sales or cost levels, to assess how each scenario would affect the business. |
| Self-Employed | Individuals who work for themselves rather than under a contract of employment. They are responsible for their own tax and National Insurance and are not usually covered by minimum wage rules. |
| Statutory Sick Pay (SSP) | A legal entitlement for qualifying employees who are off work due to illness for more than a set number of days. SSP is paid by the employer at a fixed statutory rate. |
| Wage Rates | The amount of pay a worker receives for each hour of work. Wage rates can differ by age, role, sector and experience but should not fall below the relevant minimum wage. |
| Zero-Hours Contract | An arrangement where the employer does not guarantee any minimum number of working hours and the worker does not have to accept work offered. Time worked under a zero-hours contract is still subject to minimum wage rules. |
Section K: Additional Resources & Links
| Resource | Description | Link |
|---|---|---|
| National Minimum Wage and Living Wage calculator for workers | Government tool for workers to check whether they are receiving at least the correct statutory minimum wage for their age or apprentice status. | https://www.gov.uk/am-i-getting-minimum-wage |
| Low Pay Commission (LPC) | Independent body that advises the Government on National Minimum Wage and National Living Wage rates and publishes research and recommendations. | https://www.gov.uk/government/organisations/low-pay-commission |
| HMRC – National Minimum Wage enforcement | Guidance on how HMRC enforces minimum wage rules and how workers can complain about possible underpayment. | https://www.gov.uk/national-minimum-wage/complain-about-underpayment |
| UK Government – Working hours and time off | Government guidance on working time rules, rest breaks and holidays, which interact with working time calculations for minimum wage. | https://www.gov.uk/browse/working/time-off |
| Unison – Minimum Wage | Trade union information and support for workers on minimum wage entitlements and what to do if they suspect underpayment. | https://www.unison.org.uk/get-help/knowledge/pay/minimum-wage/ |
| GOV.UK – Business Support Helpline | Helpline and online resources for businesses needing support on compliance issues, including pay and minimum wage obligations. | https://www.gov.uk/business-support-helpline |
| UK Government – Apprenticeships | Information on apprenticeship schemes, rights and obligations, including pay rules and the apprentice minimum wage. | https://www.gov.uk/topic/further-education-skills/apprenticeships |
