National Minimum Wage Increase: What Employers Need to Know
The National Minimum Wage (NMW) is set to increase next week, with changes that will impact businesses across the UK. Whether you’re an employer managing a small team or a larger organisation, staying compliant with these new rates is essential for fostering employee satisfaction and avoiding potential legal risks.
In this article, we’ll break down the new rates for 2025, highlight key compliance tips, and discuss common errors to help ensure your business is fully prepared.
The Updated National Minimum Wage Rates
From 1st April 2025, the hourly NMW rates will increase as follows:
| Category | Previous Rate (since April 2024) | New Rate (from April 2025) | Increase |
| Aged 21 and over (“National Living Wage”) | £11.44 | £12.21 | +£0.77 |
| Aged 18 to 20 | £8.60 | £10.00 | +£1.40 |
| Ages 16 to 17 | £6.40 | £7.55 | +£1.15 |
| Apprentices | £6.40 | £7.55 | +£1.15 |
These increases represent a significant rise, particularly for younger workers and apprentices. For businesses, this means adjusting payroll budgets to reflect the new rates.
Why This Change Matters
These increases aim to close the gap between age categories, ensuring fair pay for workers at different career stages. While the adjustments are designed to support the workforce amidst rising living costs, they also bring implications for employers.
Failing to comply with the updated rates can lead to fines, reputational damage, and legal challenges. Beyond compliance, paying a fair wage is also crucial for employee retention and job satisfaction, contributing to a healthier workplace culture.
Points to Consider for Employers
Budget Updates
The most important step is to make sure the payroll budget has been reviewed to factor in these changes. For employers with a high proportion of younger workers or apprentices, the impact on overall staffing costs is more noticeable.
Payroll System Adjustments
Ensure your payroll systems are updated to reflect the new 2025 rates. Modern payroll software usually includes automated updates for compliance, but it’s always wise to double-check.
Communication with Employees
Clear communication around pay increases is key. Share the news with your team so that they’re aware of the adjustments. For apprentices and younger workers, particularly, this increase could make a big difference to their overall income.
Common Compliance Errors
Compliance with the NMW is non-negotiable, but mistakes are still common. Here are a few errors we have seen employers make in the past and tips on how to avoid them:
Misapplication of the Apprentice Rate
The apprentice rate often causes confusion. Employers sometimes mistakenly pay the apprentice rate to individuals who are no longer eligible. To clarify, the apprentice rate only applies to those under 19 or those aged 19 or over who are in the first year of their apprenticeship. Beyond these criteria, the age-based minimum wage must be applied instead.
Tip: Regularly audit your payroll records and confirm that the correct rates are applied for each individual, especially those transitioning out of the apprentice category.
Unpaid Training or Preparation Time
NMW legislation requires that employees be paid for any required training or preparation time. Failing to include these hours in calculations can unintentionally lower an employee’s effective hourly rate, resulting in non-compliance.
Tip: Review all employee activities to ensure compensation is provided for required tasks outside their standard shift hours.
Deductions for Uniforms or Equipment
If your business deducts costs for uniforms or equipment from employees’ wages, you must ensure these deductions don’t reduce their pay below the NMW.
Tip: Keep a record of all deductions and cross-check them with wage records to ensure compliance.
Rounding Errors
It might seem trivial, but small rounding discrepancies on hourly rates can add up over time and result in non-compliance.
Tip: Use payroll software or tools that calculate wages down to precise decimals to eliminate this risk.
What This Means for Recruitment
For employers looking to recruit, the NMW increase highlights the need to offer competitive wages while staying compliant. Our team can help you manage these changes with tailored advice and staffing solutions, so you can focus on growing your business with confidence.
Talk to a recruitment expert about how to manage wage increases effectively. Get in touch
