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National Minimum Wage Last modified: September 22, 2025

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National Minimum Wage

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What is the National Minimum Wage?

The National Minimum Wage (NMW) is the lowest hourly pay rate that most workers in the UK are legally entitled to receive. Introduced in 1999 under the National Minimum Wage Act 1998, it was designed to protect workers from exploitation and promote fair pay.

In 2016, the National Living Wage (NLW) was introduced, initially for workers aged 25 and over. As of April 2024, the NLW applies to all workers aged 21 and above.

Alongside the legal NMW, there is also the Real Living Wage, a voluntary benchmark set by the Living Wage Foundation, which is typically higher than the statutory minimum. Many employers choose to adopt this as part of their employer brand strategy.

What does the National Minimum Wage mean?

For HR professionals and employers, the NMW is central to pay strategy, payroll compliance, and employee relations.

  • Legal Framework: Governed by the National Minimum Wage Act 1998.
  • Enforcement: HMRC is responsible for investigations, compliance checks, and penalties.
  • Coverage: Applies to most workers, including casual staff, agency workers, apprentices, and those on zero-hour contracts.
  • Exemptions: Volunteers, the genuinely self-employed, armed forces personnel, and family members in family businesses are not entitled to NMW.

Current UK Rates (from April 2025):

  • 21 and over (National Living Wage): £11.44 per hour
  • 18–20 year olds: £8.60 per hour
  • Under 18s: £6.40 per hour
  • Apprentices: £6.40 per hour

Forecast UK Rates (April 2026 – subject to confirmation):

  • National Living Wage (21+): Projected £12.71 per hour

The UK Government aims for the NLW to reach two-thirds of median earnings by 2026, so SMEs should factor this into workforce planning.

  • Why does the National Minimum Wage matter for your business?

    Risks of Non-Compliance

    Failing to pay the correct NMW or NLW can lead to:

    • Financial Penalties: Up to 200% of underpayments (capped at £20,000 per worker).
    • Public “Naming and Shaming”: BEIS publishes lists of non-compliant employers.
    • Tribunal Claims: Employees can recover back pay and compensation.
    • Criminal Liability: In serious cases, employers may face prosecution.
    • Reputation Damage: Non-compliance undermines trust and brand reputation.

    Business Benefits of Compliance

    • Builds trust and engagement with employees.
    • Strengthens recruitment and retention by showing fairness.
    • Supports accurate budgeting and workforce planning.
    • Protects against costly disputes and investigations.

  • National Minimum Wage – best practices for employers

    1. Run Payroll Audits: Regularly review pay records to check compliance.
    2. Keep Accurate Records: Employers must keep records of pay and hours for at least 6 years.
    3. Factor in Deductions: Uniform costs, equipment, and travel between sites can reduce pay below NMW.
    4. Count All Working Hours: Training, trial shifts, and travel during work must be included.
    5. Correct Apprentice Pay: Apprentices under 19 or in their first year qualify for the apprentice rate; beyond this, they must be paid the correct NMW/NLW for their age.
    6. Avoid Common Mistakes:

    • Misclassifying interns or apprentices.
    • Rounding down hourly rates in payroll systems.
    • Expecting staff to work “off the clock.”
    • Counting tips and service charges toward NMW (not allowed).

    7. Plan Ahead: Update payroll systems every April to reflect new rates.
    8. Engage Strategically: Some employers choose to pay above NMW (e.g. Real Living Wage) to strengthen their Employee Value Proposition (EVP).

Your Questions Answered

FAQs on National Minimum Wage

  • Do tips or service charges count towards the NLW?Reveal

    No. Employers cannot use tips, gratuities, or service charges to meet the NLW.

  • Can employees agree to be paid less than National Minimum Wage?Reveal

    No. NMW is a statutory right and cannot be waived.

  • Does the National Minimum Wage apply to interns?Reveal

    If the intern is classed as a “worker” (performing regular duties), they must be paid at least NMW. Voluntary internships with no contractual obligation may be unpaid.

  • Do tips count towards the National Minimum WageReveal

    No. Tips, service charges, and gratuities cannot be counted towards minimum wage compliance.

  • Do salaried staff qualify for the National Minimum WageReveal

    Yes. Employers must calculate whether their salary, divided by actual working hours, meets or exceeds the NMW.

  • What’s the difference between the National Minimum Wage and National Living Wage?Reveal

    The NMW applies to workers under 21, while the NLW applies to workers aged 21 and above.

Where to find out more A collection of hand-picked useful resources in relation to National Minimum Wage from impact HR and beyond

Need support with managing your National Minimum Wage obligations?

Whether you’re updating HR policies, training managers, or handling complex employee issues, impact HR can help you stay compliant, confident, and in control. Request a callback to see how we can support your business.

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