Paying below the National Minimum Wage is not a technical breach that quietly slips through the system. It is a criminal offense, triggers automatic penalties of up to 200% of any underpayment, results in public naming of the employer, and, since April 2026, is enforced by a body with significantly more reach than the HMRC team it replaced. For most employers, the compliance steps are straightforward, but the most common breaches are not due to deliberate underpayment. They come from payroll systems not updated in time, apprentice rates applied for too long, and deductions that push workers below the legal minimum without anyone noticing. This guide covers the current rates, who qualifies, what counts as pay, common pitfalls, and what you are legally required to do.
Current rates from 1 April 2026
From 1 April 2026, National Minimum Wage and National Living Wage rates increased across all age bands. The confirmed rates are:
For context, the previous rates were £12.21 for workers aged 21 and over, £10.00 for 18- to 20-year-olds, and £7.55 for under-18s and apprentices. The 18-20 rate saw the largest proportional rise, at 8.5%, significantly narrowing the gap with the adult rate. The National Living Wage for workers aged 21 and over rose by 4.1%.
The difference between the National Living Wage and the National Minimum Wage
These are not two separate legal regimes. They are the same statutory framework with different labels applied to different age bands. The National Living Wage is the highest statutory minimum wage rate in the UK, specifically for workers aged 21 and over. The National Minimum Wage covers younger workers at the lower rates set out above. Both are legally required minimums. An employer cannot choose which rate to apply or pay a lower rate than the one applicable to the worker’s age band.
The Real Living Wage, set by the Living Wage Foundation, is a separate, voluntary rate calculated based on actual living costs. It is currently higher than the statutory minimums but carries no legal obligation unless an employer has specifically committed to paying it.
Who qualifies
The minimum wage applies to almost all workers in the UK, not just employees. It applies universally across full-time, part-time, zero-hours, and casual contracts. Agency workers supplied to a client business are also covered. The legal test is whether someone is a worker, which is a broader category than employee and covers most people who personally perform work under a contract or arrangement, even an informal one.
The worker’s age determines the rate that applies at the start of the pay reference period. When a worker moves into a higher age band, the new rate applies from the pay reference period on or after their birthday, not immediately mid-period. Employers should ensure they have accurate records of workers’ ages to apply the correct rate from the right point.
Who does not qualify
The exemptions are narrow and strictly interpreted. Mislabelling someone as self-employed or a volunteer to avoid minimum wage obligations is itself a breach.
Some groups not entitled to the minimum wage include genuinely self-employed people running their own businesses. These include company directors who do not have an employment contract; genuine volunteers working for a charity or voluntary organization, with limited expenses; members of the armed forces; family members living in the employer’s home; students on work placements of up to one year; workers on certain government employment programs; and prisoners. This is not an exhaustive list, and employers should check GOV.UK for the full set of exemptions applicable to their situation.
The keyword in all of these categories is genuinely. An employer cannot avoid the minimum wage by simply labeling someone self-employed or a volunteer when they are doing the same work an employee would do. Enforcement bodies look at the reality of the working arrangement, not the label given to it.
On interns specifically: if an intern carries out real work for the business, such as answering emails, serving customers, carrying out administrative tasks or producing work that the business uses, they are likely to be a worker and may be entitled to the National Minimum Wage, regardless of the title given to the role. An employer cannot avoid minimum wage obligations simply by calling the arrangement an unpaid internship or voluntary placement. Genuine work shadowing, where the person only observes and does not perform work, will not normally trigger a minimum wage obligation.
What counts as pay for minimum wage purposes
This is where many employers inadvertently fall into breach. The minimum wage applies to gross pay, not to everything that counts as pay for this calculation.
Pay for minimum wage purposes includes basic pay, performance bonuses, and most cash payments. It does not include overtime premiums above the basic rate, tips paid directly to workers, benefits in kind except accommodation, or premium rates for unsocial hours.
Deductions or payments related to employment can reduce pay for minimum-wage purposes and may create an underpayment. Common examples that cause problems include the following:
Uniform and equipment deductions
If a worker pays for a uniform or tools required for the job and that payment reduces their hourly rate below the minimum, the employer is in breach. The cost of uniforms, tools, and equipment required by the employer must not effectively reduce take-home pay below the legal minimum.
Salary sacrifice
Salary sacrifice arrangements that reduce pay below the minimum wage are not permitted. If a worker is already at or near the minimum wage, any salary-sacrifice arrangement must be carefully reviewed before implementation.
Tips
Tips do not count toward minimum wage calculations. A worker cannot be paid below the minimum wage, with tips used to make up the shortfall. This is a common error in hospitality.
Accommodation
Where an employer provides accommodation, the daily offset is £11.10. This means an employer can reduce a worker’s pay by up to £11.10 per day to account for accommodation provided, without this counting as an underpayment. Any reduction above the offset rate is an unlawful deduction.
Apprentice rate rules: the most commonly misunderstood area
The apprentice rate of £8.00 per hour is one of the most frequent sources of underpayment, typically due to the same misunderstanding year after year.
The apprentice rate applies if the apprentice is under 19, or aged 19 and over, and still in the first year of their apprenticeship.
Once an apprentice aged 19 or over completes their first year, they must be paid at least the minimum wage rate for their age band. This means:
- An apprentice who is 19 or 20 after completing year one must receive at least £10.85 per hour
- An apprentice who is 21 or over after completing year one must receive at least £12.71 per hour
Employers who continue paying the apprentice rate of £8.00 beyond the first year are underpaying, often for months or years before it is caught. This is one of the most common sources of underpayment identified in enforcement action.
Working time: what counts toward hours
Minimum wage calculations are based on the worker’s pay divided by the hours that count for minimum wage purposes. These hours are not always obvious.
Time spent traveling between assignments or client sites will usually count when the worker is required to travel as part of the job. Time spent on employer-required training will also generally count. Waiting time or standby time may count where the worker is required to be at or near the workplace, or is otherwise restricted by the employer and available for work.
Time spent commuting from home to the first workplace, and from the last workplace back home, generally does not count. Genuine unpaid rest breaks also do not usually count.
When sleeping time is involved, such as for care workers or overnight staff, the rules are more complex and depend on the specific arrangements. Employers using sleep-in shifts should seek specific advice to confirm whether those hours count for minimum wage purposes.
The Fair Work Agency: a new enforcement landscape
On 7 April 2026, the Fair Work Agency launched as a single enforcement body, consolidating the Employment Agency Standards Inspectorate and the Gangmasters and Labor Abuse Authority under one roof. It also assumes strategic oversight of National Minimum Wage compliance. However, day-to-day NMW enforcement continues to be carried out by HMRC throughout 2026/27 under a contracting arrangement with the Agency. Full operational responsibility for NMW enforcement is expected to transfer to the Fair Work Agency in April 2027.
During 2026/27, minimum wage enforcement continues to be delivered by HMRC under a contracting arrangement with the Fair Work Agency. Full transfer is anticipated in April 2027. The government has described 2026 and 2027 as a transitional year for the agency.
What the Fair Work Agency changes is the reach and proactivity of enforcement. The agency can conduct proactive, unannounced workplace inspections without waiting for a worker complaint. It can issue underpayment notices, apply penalties of up to 200% of the underpayment, capped at £20,000 per worker, review records going back up to six years, bring tribunal claims on behalf of workers, recover its enforcement costs from employers, and publicly name employers found to be in breach.
The shift from a complaint-led system to a proactive investigation model means employers can no longer rely on workers’ lack of awareness of their rights or unwillingness to make a formal complaint. The Fair Work Agency can identify risk sectors, target industries with known compliance issues, and open investigations on its own initiative.
Penalties for non-compliance
The consequences of underpaying the minimum wage are significant. Every penny of underpayment must be repaid at current rates, meaning historical underpayments are calculated at today’s rate rather than the lower rate that applied at the time.
In addition to repayment, penalties of up to 200% of the arrears apply, capped at £20,000 per worker. For an employer with multiple underpaid workers, this can quickly add up to very large sums. The employer is also publicly listed on the government’s naming-and-shaming list.
In serious cases, criminal prosecution remains possible.
Record-keeping obligations
The consequences of underpaying the minimum wage are significant. Every penny of underpayment must be repaid at current rates, meaning historical underpayments are calculated at today’s rate rather than the lower rate that applied at the time.
In addition to repayment, penalties of up to 200% of the arrears apply, capped at £20,000 per worker. For an employer with multiple underpaid workers, this can quickly add up to very large sums. The employer is also publicly listed on the government’s naming-and-shaming list.
In serious cases, criminal prosecution remains possible.
What employers must do: a practical checklist
- Update your payroll from 1 April each year when new rates take effect. The new rate applies from the first pay reference period starting on or after 1 April. This means that where a pay reference period straddles 1 April, the old rate continues to apply for that period, and the new rate takes effect from the start of the next pay reference period.
- Track worker ages and review rates whenever a worker’s birthday moves them into a higher age band. Set calendar reminders in your payroll or HR system keyed to the employee’s date of birth. Roughly one in five minimum wage breaches is an accidental failure to update the rate when a worker crosses an age threshold.
- Monitor apprenticeship progress and move apprentices aged 19 or over onto their correct age-band rate once they complete the first year. An apprentice who is 19 or 20 after year one moves to £10.85. An apprentice who is 21 or over moves to £12.71. Do not assume the apprentice rate continues to apply throughout the apprenticeship.
- Review all deductions from wages to confirm they do not reduce pay below the minimum. Uniform costs, equipment deductions, and salary sacrifice arrangements are the most common culprits.
- Confirm that tips are not being used to make up the difference between basic pay and the minimum wage.
- If you provide accommodation, apply the daily offset of £11.10 and ensure any deduction above this is treated separately.
- Maintain pay records for a minimum of six years and ensure records are detailed enough to demonstrate compliance if the Fair Work Agency requests them.
- If your workforce includes workers you currently treat as self-employed or volunteers, review those arrangements against the legal definition of worker. Given the Fair Work Agency’s enhanced proactive powers, misclassification carries a significantly greater risk than before April 2026.
Begin planning now for the likely reduction in the NLW age threshold to 20 from 2027. If that change is confirmed, workers currently paid at the 18- to 20-rate of £10.85 will move to the adult NLW rate, which will have increased further by then.
Conclusion
The Fair Work Agency launched in April 2026 with broader powers and a more proactive enforcement approach than its predecessors. Day-to-day minimum wage enforcement will continue to be carried out by HMRC throughout 2026/27 under a contracting arrangement with the Agency, with full operational responsibility transferring in April 2027. Employers should not treat the transitional year as a period of reduced scrutiny; enforcement levels are expected to remain at or be strengthened as the Agency develops its capabilities.
The rates are confirmed annually and apply from the first pay reference period starting on or after 1 April. The most common breaches are not deliberate. They come from systems not updated in time, apprentice rates held too long, and deductions that inadvertently push pay below the legal floor.
An employer who reviews their payroll against every rate band at the start of each new pay reference period following 1 April, monitors workers’ ages at the start of each pay reference period throughout the year, applies the correct post-year-one rate for apprentices, and keeps records for six years is in a strong compliance position. One who leaves it to chance is not.
