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National minimum wage

Overview
Overview

The national minimum wage (NMW) applies to all workers and is paid at different rates according to age. There is a separate rate for apprentices, and a National Living Wage (NLW) that applies to workers aged 23 and over. The current and future rates for the minimum wage (which represents gross pay) are as follows.

Age Rate from 1 April 2020 Rate from 1 April 2021 Rate from 1 April 2022
Workers aged 25 and over (NLW)* £8.72 - -
Workers aged 21 - 24* £8.20 - -
Workers aged 23 and over (NLW)* - £8.91 £9.50
Workers aged 21-22* - £8.36 £9.18
Development rate for workers aged 18-20 £6.45 an hour £6.56 £6.83
Young workers rate for workers aged 16-17 £4.55 an hour £4.62 £4.81
Apprentices under 19, or over 19 and in the first year of the apprenticeship £4.15 an hour £4.30 £4.81
 
Employers paying output workers, including home workers, piece rates (payment according to the number of items produced or tasks completed) must either pay the minimum wage for every hour worked, or a 'fair piece rate' (currently set at 120 per cent of the NMW). 

The minimum wage rates are reviewed annually and will be updated in April.

*Since1 April 2021, the NLW was extended to cover all adults aged 23 and above. 

Key points

  • All workers, except those who are genuinely self-employed, are entitled to receive the NMW/NLW
  • Gross pay is used to calculate whether an eligible worker has been paid the minimum wage
  • The NMW/NLW is calculated by including most financial awards or payments, but excluding allowances such as regional or on-call allowances, unsocial hours payments, tips and gratuities, or any benefits in kind, with the exception of accommodation up to a specified amount
  • Employers can average the hourly rate of pay over the pay period
  • Single hourly rates that a worker is entitled to in a pay reference period applies on the first day of that period; for example, if a worker turns 25 on January 25, and their next pay reference period begins on February 1, they will receive the NLW from February 1.
  • Non-compliance can result in an enforcement notice requiring the employer to pay the difference between what was actually paid and what the worker should have received under the NMW legislation. Further non-compliance could result in the issue of a penalty notice and financial penalties.

Recent developments

Significant increases to national minimum and living wage now in place

In the budget on 27 October 2021, the Chancellor Rishi Sunak announced that National Living Wage, for those aged 23 and over, will rise from £8.91 to £9.50, with effect from 1 April 2022.

Further increases are as follows: 

  Rate from April 2022  Rate from April 2021 to March 2022) Increase

National Living Wage

£9.50

£8.91

6.6%

21-22 Year Old Rate

£9.18

£8.36

9.8%

18-20 Year Old Rate

£6.83

£6.56

4.1%

16-17 Year Old Rate

£4.81

£4.62

4.1%

Apprentice Rate

£4.81

£4.30

11.9%

 

Planned law on protection of tips quietly shelved

It has been reported, on 5 May 2022, that planned legislation that would require employers to pass on 100% of tips has been shelved, and will therefore no longer come into force. 

This will be a blow to those working especially in hospitality, where pay is typically low and there has been a significant shift to cashless payments following the pandemic.