National Minimum Wage
The National Minimum Wage is the minimum pay rate a worker is entitled to. The rate is set per hour and depends on the worker’s age and whether they are an apprentice. All employers have to pay the correct minimum wage, it does not matter whether they have a single employee or a large corporation.
The National Minimum Wage is set by the Low Pay Commission then adopted by the UK Government. The following rates come into force on 1 st April 2025:
| NMW Rate | Increase (£) | Increase (%) | |
|---|---|---|---|
| National Living Wage (21 and over) | £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 |
| Apprentice Rate | £7.55 | £1.15 | 18 |
| Accommodation Offset | £10.66 | £0.67 | 6.7 |
What workers do not qualify for National Minimum Wage?
Not all workers are entitled to National Minimum Wage but the exceptions are quite limited and specific. The following types of workers are not entitled to the National Minimum Wage or National Living Wage:
Self-employed people running their own business
Company directors
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.
Interns
Most interns will be entitled to National Minimum Wage but there are some exceptions. Each internship program will need to be assessed and then decide whether the interns are workers within the National Minimum Wage requirements. HMRC does have some guidelines.
National Minimum Wage Calculations
National Minimum Wage Calculations are not always straightforward. In a simple case the rate paid would be the gross for National Insurance (Total pay subject to National Insurance) divided by the number of hours worked in that pay period. The pay rate should be equal or greater than the National Minimum Wage for that employee to be compliant. All workers need to be at or above the hourly rate even if they are not paid by the hour.
What counts as work to be used in the calculation can also be complex. It is possible to exclude some time but care needs to be taken and legal advice sought if you are unsure for your workers. Do not include time spent:
Travelling between home and work
Away from work on rest breaks, holidays, sick leave or maternity leave
On industrial action
Not working but at the workplace or available for work at or near the workplace during a time when workers are allowed to sleep (and you provide a place to sleep).
Not all payments can be included in the calculation, these are:
Payments for the employer’s own use or benefit, for example if the employer has paid for travel to work
Things the worker bought for the job and is not refunded for, such as tools, uniform, safety equipment
Tips, service charges and cover charges
Extra pay for working unsocial hours on a shift.
Effect Of Deductions
Most deductions shown on a payslip will affect the National Minimum Wage Calculation. Even if a deduction is for an item or service the employee has purchased from the company but chosen to deduct this from their net pay, it will reduce their pay used in the calculation.
Salary sacrifice schemes are becoming more popular; as these reduce gross pay subject to National Insurance they will impact the National Minimum Wage calculation. Great care needs to be taken with Salary Sacrifice schemes.
Summary
Take care when calculating wage rates for your employees, it is not always as straightforward as you may assume. There is plenty of guidance available from HMRC and other sources and seek legal advice if your situation is more complex. As a final note this is just about National Minimum Wage, auto-enrolment pensions are assessed on different criteria for whether an employee is eligible.
Additional Resources:
https://www.gov.uk/national-minimum-wage
https://www.gov.uk/government/publications/minimum-wage-rates-for-2025
https://www.gov.uk/minimum-wage-different-types-work
https://www.gov.uk/employment-rights-for-interns
https://www.gov.uk/guidance/calculating-the-minimum-wage