What is the National Minimum Wage? A guide for employers

Most employers know they need to pay the National Minimum Wage. But knowing exactly which rate applies to which worker, and what happens if you get it wrong, is where things get a little more complicated.

This guide covers everything you need to know: what the National Minimum Wage and National Living Wage are. who's legally entitled to what, how the rates are set, and what the Real Living Wage means for your business.

Skip to:

• What is the National Minimum Wage?

• What is the National Living Wage? 

• Current minimum wage and living wage rates

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

• What are the Real Living Wage and London Living Wage?

• Who is entitled to receive the National Minimum Wage or National Living Wage?

• What happens if a business doesn't pay employees the correct minimum wage?

• How to stay compliant with National Minimum Wage and employee pay

What is the National Minimum Wage?

The National Minimum Wage (NMW) is the legal minimum hourly rate employers must pay their workers in the UK, as set by the government. It is designed to ensure a basic standard of living and prevent worker exploitation.

Higher wages help combat relative poverty and improve living standards for low-wage workers. So the National Minimum Wage helps to directly raise earnings for the lowest-paid workers.

The National Minimum Wage rates are updated annually, with the new rates typically announced in October. The rates then typically come into effect the following April.

There are different minimum wage rates depending on a worker's age and whether they're an apprentice:

• If you're aged 21 or over, the relevant rate is called the National Living Wage (NLW)

• If you're aged under 21 or you're an apprentice, the relevant rate is called the National Minimum Wage (NMW)

The two terms are often used interchangeably, but they're not the same thing. The NLW is the higher rate, applying to older workers. The NMW covers younger workers and apprentices, with different minimum hourly rates for each group.

The National Minimum Wage has seen various increases since its introduction in 1999. And the National Living Wage has had various changes to it's age limit including:

• The National Living Wage was for those aged 25 and over before 1 April 2021.

• From 1 April 2021 to 31 March 2024, the National Living Wage was for those aged 23 and over.

• From 1 April 2024, the National Living Wage became for those aged 21 and over.

What is the National Living Wage?

The National Living Wage (NLW) is the minimum hourly rate for workers aged 21 and over. The NLW rate is set by the government each year, based on recommendations from the Low Pay Commission. 

Current minimum wage and living wage rates

The minimum wage and living wage rates change on 1 April every year. Here's a full breakdown of the rates for the 2026/26 and 2026/27 tax years.

National Minimum Wage pay is calculated on gross pay (before tax and National Insurance have been taken off. The government provides a minimum wage calculator to help employers and workers check eligibility and rates.

Some payments don't count towards National Minimum Wage pay including:

• Tips and gratuities

• Premium pay for working overtime, nights or bank holidays

• Repayment of expenses, loans or advances of wages

• Any company benefits or perks*

• Salary sacrifice schemes where pay is given up for things like childcare vouchers or company cars

• Redundancy payments

• Pension payments

• Shares or share options

*The only exception is accommodation. If you provide an employee with accommodation, you can count some of its value towards the National Minimum Wage (NMW) pay. The accommodation offset rate is the most you can count towards NMW pay.

What is the apprentice rate?

Apprentices have their own minimum wage rate, which is typically lower than the rate for their age group during the early stages of apprenticeship. The apprentice rate applies to apprentices aged under 19, or those aged 19 and over who are in their first year of their apprenticeship.

Once an apprentice is 19 or over and has completed their first year, they're entitled to the minimum wage rate for their age group. It's worth keeping an eye on each apprentice's progress and anniversary date to make sure their pay is updated at the right time.

What's the difference between National Minimum Wage and National Living Wage?

The main difference is age. The National Living Wage applies to worker aged 21 and over, while the National Minimum Wage applies to younger workers and apprentices, with different rates for each age group.

Both are legal minimums. Employers must pay at least the relevant minimum wage rate for each worker's age group. Paying less than this is against the law, regardless of whether a worker is full-time, part-time, on a zero-hours contract, or paid by the piece or output rather than by the hour.

What are the Real Living Wage and London Living Wage?

The Real Living Wage is different to the National Minimum Wage and National Living Wage in several ways:

• The National Minimum Wage is a legal requirement set by the government, while the Real Living Wage is a voluntary rate paid by employers.

• The Real Living Wage is independently calculated each year by the Living Wage Foundation, while the National Minimum Wage is reviewed annually by the government.

• The Real Living Wage is calculated based on the real cost of living, while the National Minimum Wage is determined by government assessments of the labour market. This means that the Real Living Wage is designed to reflect the cost of essentials like rent, food, travel and energy, whereas the National Minimum Wage does not take these specific costs into account.

Even though the Real Living Wage is a voluntary rate, more than 14,000 UK businesses have signed up as Living Wage Employers, choosing to pay it because they believe their workers deserve wages they can genuinely live on.

The Living Wage Foundation also set a London Living Wage that's higher to reflect the higher cost of living in the capital. London weighting is a well-established concept in UK employment, recognising that rent, transport and everyday expenses are significantly more expensive in London than in most of the rest of the UK.

From April 2026, the UK Real Living Wage for employees who are 18 and older is £13.45 per hour across the UK and for workers in London, the London Living Wage is £14.80 per hour.

The Real Living Wage is rooted in a simple idea: that work should pay enough for people to live with dignity. For employers, becoming an accredited Living Wage Employer is a way of signalling that commitment to their team and their community. And it benefits you as an employer too as higher wages can increase motivation and work participation rates.

Who is entitled to receive the National Minimum Wage (NMW) or National Living Wage (NLW)?

The NMW applies to almost all workers, including part-time and agency staff, but excludes self-employed individuals and company directors. There are some other exceptions too. The following groups are also not entitled to the minimum wage:

• people who are volunteers or voluntary workers

• workers on a government employment programme, such as the Work Programme

• members of the armed forces

• family members of the employer living in the employer’s home

• workers younger than school leaving age (usually 16)

• higher and further education students on work experience or a work placement up to one year

• people shadowing others at work

• workers on government pre-apprenticeships schemes

• people on the following European Union (EU) programmes: Leonardo da Vinci, Erasmus+, Comenius

• people working on a Jobcentre Plus Work trial for up to 6 weeks

• share fishermen

• prisoners

• people living and working in a religious community
  
  

The full list is available on the UK government website. If you're unsure whether a particular worker is entitled to the minimum wage, speaking to an employment adviser is the safest approach.

But keep in mind, most workers who are above school leaving age are legally entitled to the National Minimum Wage or National Living Wage, depending on their age.

What happens if a business doesn't pay employees the correct minimum wage?

Getting minimum wage wrong, even accidentally has real consequences.

From 6 April 2026, enforcement of the National Minimum Wage sits with the Fair Work Agency, a new body established under the Employment Rights Act 2025.

The Fair Work Agency brings together enforcement functions that were previously spread across different government bodies, including HMRC's National Minimum Wage enforcement team, into a single organisation. Its remit it broader and its powers more coordinated than what came before.

The Fair Work Agency can investigate employers at any time, either following a complaint from a worker or as part of a routine audit. If underpayment is found, the employer must immediately pay back any arrears.

On top of that, employers face a mandatory penalty of 200% of the underpaid amount (up to a maximum of £20,000 per worker). And that's before reputational damage. Employers who receive a notice of underpayment can also be publicly named.

Records can be checked going back six years. So, keeping accurate, accessible payroll records ins't just good practice, it's essential protection.

If a worker believes they've been underpaid, they can report this to the Fair Work Agency directly. Employees can also contact Acas for impartial advice on their rights.

How to stay compliant with National Minimum Wage and employee pay

Keeping on top of minimum wage compliance is easier when your employee data is all in one place.

HR software, like Breathe, gives you a secure, central record of each worker's date of birth, employment start date and pay details. That makes it straightforward to check that everyone's hourly rate is right for their age group, and to spot if anyone's rate needs updating, such as when an apprentice completes their first year or turns 19.

Features like a timelog function let you cross-check hours worked against salary, so you can catch any accidental underpayment before it becomes a problem. And when the Fair Work Agency come knocking, having records stored securely in the cloud means you can pull the information you need quickly and easily.

Explore Breathe's HR software.