Employer’s guide to minimum wage

The National Minimum Wage (NMW) is the minimum hourly rate employers must pay workers under 21 years of age. 

The National Living Wage (NLW) is the minimum hourly rate for workers aged 21 and over.

Both rates are set by the UK Government following recommendations from the Low Pay Commission (external link), an independent body of employers, trade unions, and experts.

The rates change on 1 April annually, and employers must update their payroll systems accordingly to help ensure compliance. 

From April 2026 (external link), the rates are as follows:

The apprentice rate applies to apprentices under 19 or those aged 19 and over who are in their first year. After completing the first year of apprenticeship, apprentices aged 19 or over are entitled to receive the standard rate for their age. For example, a 21-year-old apprentice in their second year of their apprenticeship is entitled to a minimum rate of £12.71 per hour.

‘Workers’ (external link), who are at least school leaving age (external link), are entitled to the National Minimum Wage. This includes most employees and workers with employment contracts, as well as: 

• Part-time employees. 
• Agency workers, temporary, and flexible working staff. 
• Casual workers and those on zero-hours contracts. 
• Trainees and workers on probation. 
• Disabled workers. 
• Agricultural workers. 
• Workers paid by the number of items they make. 

Workers who are not entitled to the National Minimum Wage or National Living Wage include: 

• Self-employed people. 
• Company directors. 
• Voluntary workers. 
• Workers in family businesses who live in the family home. 
• Workers on government employment programmes. 
• People under school leaving age (typically 16). 

GOV.UK advises those who offer internships (external link) to check if the person is entitled to the minimum wage. 

These lists are not extensive, and policies often change. For the most comprehensive and up-to-date information, visit GOV.UK (external link).

Employers have various legal obligations under the National Minimum Wage Act 1998 (external link), and subsequent recent amendments (external link).

For example, employers must: 

• Pay at least the minimum wage for all eligible hours worked. 
• Update pay rates when new rates are announced in April. 
• Ensure payslips clearly show the hours worked and wages paid.

Accurate record-keeping is mandatory, including maintaining detailed records of working hours, wages paid, and any deductions for at least six years (external link). 

Employers must also ensure that any salary sacrifice schemes (external link), uniform costs, or other deductions do not reduce pay below the minimum wage threshold.

Breaking minimum wage laws can result in significant penalties and reputational damage. HMRC can issue penalty notices (external link) up to 200% of the underpayment for each worker, with a minimum penalty of £100 and a maximum of £20,000 per worker. Non-compliant employers must also repay the full balance owed to workers. HMRC publishes (external link) the names of employers who fail to pay the minimum wage, which can affect the guilty business’s reputation, recruitment, customer relationships, and partnerships.

Minimum wage compliance is currently overseen by HMRC on behalf of the Department for Business and Trade (DBT). From April 2027, responsibility for enforcement is expected to transfer to the Fair Work Agency’s (FWA).

The FWA was established in April 2026 under the Employment Rights Act 2025 to enforce a broad range of labour laws and help protect workers from exploitation, non-compliance, and abuse. Its enforcement powers are being introduced in phases, rather than transferring all responsibilities at once.

The apprentice rate (external link) of £8.00 per hour applies to those under 19 years of age, or those aged 19 and over in their first year of apprenticeship. This covers the period when apprentices are learning foundational skills and receiving structured training. Once an apprentice completes their first year or reaches their 19th birthday, they are entitled to the minimum wage for their age. 

Employers (external link) must adjust pay rates accordingly to help ensure they stay compliant.

To calculate minimum wage, you must determine total pay for the relevant pay period and divide it by the number of hours worked. This includes basic wages, bonuses, and incentive pay (which relates solely to the worker’s performance), but excludes things like benefits in kind, overtime, allowances, and pension payments. 

You can find the full list of exclusions at GOV.UK (external link), where employers can also access the government’s guide to calculating minimum wage to help ensure workers receive the correct wage.

The statutory National Living Wage is the legal minimum rate set by the government for workers aged 21 and over. The real Living Wage, calculated by the Living Wage Foundation (external link) as the cost of living, is a voluntary higher rate based on the actual cost of living. It’s updated annually and is typically higher than the National Living Wage. For example, in 2026, the National Living Wage is £12.71 per hour, while the real Living Wage is £13.45 (£14.80 in London). 

The real Living Wage applies to all workers aged 18 and over, unlike the age-based statutory rates. While paying the Real Living Wage is not legally required, many employers choose to pay these higher rates to attract and retain talent, reduce staff turnover, and show their commitment to employees.