A summary of the key points and considerations for employers are below:
- The NLW applies for workers age 21 and over, with the current rate now £12.71 per hour.
- The NMW rates for younger workers have also increased, with £10.85 per hour payable to those age 18 to 20 and £8 per hour for those under 18.
- The Apprentice rate is £8.00 per hour for those aged under 19, or age 19 or over and in the first year of their apprenticeship. If an apprentice is age 19 or over and has completed the first year of their apprenticeship, they will then need to be paid the NMW/NLW based on their age.
Employers should keep in mind that although an employee’s headline hourly rate may meet or exceed the above, there are a number of common pitfalls that can result in pay falling below the required rate. These include:
- Salary sacrifice arrangements – pension contributions made via salary sacrifice reduce the gross pay for NMW purposes. Similarly, schemes such as Cycle To Work operate in the same way, meaning lower paid employees may not be able to participate.
- Deductions – deductions from net pay for work-related expenses such as uniform or tools reduce the average hourly rate and may therefore reduce the rate below NMW.
- Unpaid working time – time spent on work related activities such as training, attending meetings or opening and closing premises must be treated as normal working hours and paid accordingly.
- Overtime – premium pay is not included when calculating NMW, only the basic rate, so if an employee works a significant amount of overtime, their average hourly rate may be reduced.
- Age changes – employees moving into a higher age band or completing the first year of their apprenticeship must receive the increased rate from the start of the next pay reference period, otherwise they will be underpaid based on their circumstances.
From 7 April 2026, a new government agency, the Fair Work Agency, is responsible for monitoring and enforcing NMW and NLW. If a shortfall of pay is identified, it can be a costly exercise for the employer to correct this. Any arrears of pay must be paid to the employee at the current rate, even if the shortfall relates to a previous year where the rate would have been lower. In addition, a penalty of up to 200% of the arrears (capped at £20,000 per worker) may be payable to HM Revenue & Customs. Employers may also be publicly named for non-compliance.
If you would like assistance with reviewing your payroll records for NMW/NLW purposes to ensure compliance, please contact our Payroll Team at 01633 810 081 or payroll@kilsbywilliams.com.
