What is the National Minimum Wage (NMW)?
The National Minimum Wage (NMW) is the enforced minimum hourly salary that most workers in the United Kingdom are entitled to receive. It is based on hourly rates of pay and is reviewed annually by the government. These rates vary depending on the worker’s age and whether they are apprentices.
Related: 10 tips for employers for effective salary negotiation
A brief history and specific cases to consider
Introduced in 1999 by the Labour government, the NMW was established under the National Minimum Wage Act 1998. Initially, the wage was set at £3.60 per hour for workers aged 22 and older, and £3.00 per hour for those aged 18 to 21.
It is important for employers to understand that not all workers are entitled to the same minimum wage. Below, we outline key variations and specifics that employers commonly consider when reviewing pay practices:
National Minimum Wage for apprentices
The NMW rate for apprentices varies based on specific conditions:
- Apprentices over 19 years old who have completed their first year of apprenticeship are entitled to the NMW corresponding to their age group.
- Apprentices under 19 or those over 19 but in their first year of apprenticeship are entitled to a lower wage.
Related: 10 tips for employers for effective salary negotiation
Who is entitled to the NMW
The majority of workers are entitled to the NMW, including temporary, part-time workers and casual workers. However, some workers do not qualify for NMW, including self-employed and company directors, and those who are not school-leaving age.
Considerations when employers provide accommodation
If an employer provides accommodation for a worker, the value of this accommodation can be taken into account when calculating the NMW. However, other company benefits like meals, car allowance or childcare vouchers are not considered part of the NMW.
Related: Mileage rates and allowances: what UK employers should know
Exceptions to National Minimum Wage eligibility
Certain groups are exempt from receiving the NMW:
- Self-employed individuals and company directors, as previously mentioned.
- Volunteers, members of the armed forces, individuals living and working within religious communities and prisoners are not entitled to the NMW.
Related: Differences between wages and salary: the pros and cons
How much is the National Living Wage?
The NMW, including the National Living Wage (NLW), is reviewed annually by the government based on recommendations from the Low Pay Commission. As of 1 April 2024, there has been an increase in all rates.
Below is an overview of today’s minimum wages and the percentage variation versus the previous rates:
| NMW before 1 April 2024 | Percentage increase | |
| National Living Wage (21 and over) | £11.44 | 9.8% |
| Rate for 18-20-year-olds | £8.60 | 14.8% |
| Rate for 16-17-year-olds | £6.40 | 21.2% |
| Rate for apprentices | £6.40 | 21.2% |
| Accommodation offset | £9.99 | 9.8% |
Minimum wage rates are reviewed by the government annually and changes usually take effect at the beginning of the financial year, in April.
Related: How to implement a cost of living pay rise
What employers often review in relation to the NMW
Employers operate within rules that set minimum wage levels, and many organisations review their pay policies regularly to align with the latest rates. Here are employers’ other responsibilities, along with what to expect following the 2024 NMW update:
Common employer considerations
UK enforcement bodies may take action in cases where minimum wage rules are not met. Here is an overview of what else to know:
- Many organisations stay informed about updates to NMW regulations to understand potential impacts on pay structures.
- Define working time: Common misunderstandings about what constitutes working time can lead to underpayments. Some organisations clarify working hours, breaks and other working-time definitions within internal policies to reduce misunderstandings.
- Paying shortfalls promptly: If pay discrepancies arise, organisations vary in how they review their internal processes and decide next steps. Various enforcement measures are possible under UK rules, depending on the situation.
- Use available resources: Government tools, such as the National Minimum Wage and National Living Wage calculator for employers, are available for employers who want to explore wage estimates or model different scenarios.
- Keep accurate records: Some organisations maintain payroll and working-time records for extended periods to support internal processes and reviews.
Related: How to communicate a pay raise
More changes following the 2024 NMW update
The 2024 update of the National Minimum Wage brought about significant changes that many employers review in relation to their internal pay practices, including the adjustment of the National Living Wage (NLW) threshold from 23 years of age to 21. Here are more specificities that employers should be aware of:
- Living wage age threshold: Employees who are 21 years or older are now entitled to the National Living Wage.
- Apprentices: For apprentices the regulation is more complex as tax reliefs may apply, impacting how businesses calculate pay.
- Staff uniforms: Some employers review uniform or dress-code related costs to understand how these expenses interact with overall pay.
- Salary sacrifice: Salary-sacrifice arrangements can influence take-home pay, and organisations often review them to understand their impact.
- Travel time: In many cases, travel connected with work is treated as part of working time, and employers may take this into account when determining pay.
Related: Pay bands in the UK
Many organisations stay informed about changes to NMW rates and review how these updates could relate to their existing pay approaches. Secondly, they may also assess how changes in wage rates affect business costs. Many organisations take a proactive approach to reviewing pay practices to keep pace with changing wage rates.
