Effective 1 April 2025, the NLW (National Living Wage) and NMW (National Minimum Wage) increased.

The new rates are as follows:

• Ages 21 and over: 6.7% increase, from £11.44 to £12.21 per hour
• Ages 18–20: 16.3% increase, from £8.60 to £10.00 per hour
• Ages 16–17 and apprentices: 18% increase, from £6.40 to £7.55 per hour

Next steps

It is imperative to review employment contracts and ensure these reflect the updated minimum rates for all staff including part-time, temporary, and younger workers. When recruiting new staff you should consider starting salaries – from April, an employee being paid the new NLW of £12.21 per hour and working a 40 hour week would be paid just under £25,500 a year.

The increase may also compress your existing pay structure - the gap between those employees starting entry level roles may be much less than the level of their managers. Whilst there is no obligation to increase managers salaries you may feel under pressure to adjust the overall pay structure to avoid employees feeling undervalued.

Penalties

The current penalty for a failure to pay at NMW is up to 200% of the unpaid wages, with a maximum penalty of £20,000 per employee. In addition to potential fines for non-compliance, there is also a risk of reputational damage as HMRC routinely publish the names of companies that they consider to be serious offenders.