What is minimum wage?
The UK minimum wage is the legal minimum amount an employer must pay per hour of work. It’s expressed as an hourly rate, though it can also be calculated weekly or monthly depending on how an employee is paid. The purpose is to ensure fairness and consistency across industries, regardless of job type or working hours.
The minimum wage is reviewed annually by the government to reflect inflation, living costs, and broader economic factors. Increases are designed to help workers keep pace with rising expenses while narrowing the gap between low earners and the average UK salary.
Is the National Minimum Wage the same as the National Living Wage?
Although they sound similar, they apply to different age groups:
- National Minimum Wage (NMW): applies to workers under 21.
- National Living Wage (NLW): applies to workers aged 21 and over.
The strategy in 2025 has been to close the gap between age bands. By raising pay rates for younger workers at a faster pace, the UK government aims to reduce inequalities and bring wages closer to the national median.
Who is entitled to the minimum wage?
Almost all workers in the UK are entitled to the minimum wage in 2025. This includes:
- Part-time staff
- Agency workers
- Zero-hour contract workers
This consistency helps prevent exploitation, especially among vulnerable groups such as casual or agency workers.
Exceptions include:
- The self-employed
- Volunteers
- Company directors without employment contracts
Employers must stay informed about these exceptions to avoid payroll errors and compliance risks.
UK Minimum Wage Rates 2025
From 1 April 2025, the following rates apply:
| Category | NMW rate | Annual increase (£) | Annual increase (%) |
|---|---|---|---|
| National Living Wage (21+) | £12.21 | £0.77 | 6.7% |
| 18–20 Year Old Rate | £10.00 | £1.40 | 16.3% |
| 16–17 Year Old Rate | £7.55 | £1.15 | 18.0% |
| Apprentice Rate | £7.55 | £1.15 | 18.0% |
| Accommodation Offset | £10.66 | £0.67 | 6.7% |
How does the 2025 minimum wage compare to other UK salaries?
For employees aged 21+ working 35 hours a week, the new National Living Wage translates to an annual salary of £22,222.
While this is a step toward reducing in-work poverty, it still falls below the average UK salary of £31,602. Full-time staff typically earn more than part-time employees, which further widens the pay gap.
The Real Living Wage, calculated by the Living Wage Foundation, is higher than the government-set minimum. Many employers voluntarily pay this rate, improving recruitment, retention, morale, and brand reputation.
For businesses unable to pay above the minimum, offering employee benefits like flexible working, training, or enhanced holiday allowances can improve satisfaction and loyalty.
Employer Legal Obligations for Minimum Wage Compliance
Employers must comply with several legal requirements, including:
1. Paying at least the minimum wage
- Every eligible worker must be paid at least the correct rate.
- Employees must move into the correct pay band as they age.
2. Following legislation
Key laws include:
- Employment Rights Act 1996
- National Minimum Wage Act 1998
- National Minimum Wage Regulations 2015
- National Minimum Wage (Amendment) Regulations 2025
The HMRC enforces compliance and can issue penalties for breaches.
3. Keeping accurate records
Employers must maintain payroll records for at least six years, including evidence of hours worked and pay received.
4. Providing contracts and payslips
Every employee must receive:
- A written contract
- A detailed payslip showing hours, deductions, and total pay
5. Monitoring pay deductions
Employers cannot make deductions that bring pay below the minimum wage, except statutory deductions (e.g., tax, National Insurance). Costs for uniforms or training cannot legally reduce wages below the threshold.
When does the new minimum wage take effect?
- 1 April each year – aligned with the start of the UK financial year.
- When an employee’s age increases – workers move into a higher pay band from their next pay period.
Although there are discussions about phasing out age bands to avoid discrimination, they currently remain in place.
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The 2025 wage increase is one of the most significant in recent years, particularly for younger workers and apprentices. Employers must now be extra vigilant about compliance, payroll accuracy, and employee entitlements.
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