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What is The Minimum Wage in the UK? A Complete Guide
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Written by: Rinaily Bonifacio
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Last updated: 12 February 2025
Table of contents
What is the minimum wage in the UK?
The minimum wage is a legal mandate that establishes the minimum hourly rate that employers must pay their workers. This fundamental principle ensures that workers receive fair compensation for their labor and contributes to a more equitable labor market.
Minimum Wage UK 2024
The current minimum wage in the UK depends on the workers age and whether they're an apprentice. These rates came into effect on April 1, 2024
Here's a table summarizing the current minimum wage rates in the UK for 2024:
| Age Group | Rate (£ per hour) | Notes |
|---|---|---|
| 21 and over | 11.44 | This is also known as the National Living Wage (NLW). |
| 18 to 20 | 8.60 | |
| Under 18 | 6.40 | |
| Apprentice | 6.40 | This rate applies to apprentices under 19, or those aged 19 or over in the first year of their apprenticeship. After the first year, apprentices aged 19 or over are entitled to the minimum wage for their age group. |
Minimum wage in the UK in 2025
The National Minimum Wage (NMW) in the UK is set to increase on April 1, 2025. This increase is part of the government's plan to ensure that wages reflect the cost of living. The changes affect different age groups and apprentices, with the most significant rise seen in the 18-20 year old category.
Main Changes in Minimum Wage Laws as of 2025:
- National Living Wage (NLW): This is the minimum wage for workers aged 21 and over. It will increase from £11.44 per hour to £12.21 per hour, a rise of 6.7%.
- 18-20 year old rate: This sees the most significant increase, rising from £8.60 to £10.00 per hour, a 16.3% jump.
- 16-17 year old rate: This will increase from £6.40 to £7.55 per hour, an 18% rise.
- Apprentice rate: This also increases from £6.40 to £7.55 per hour, an 18% rise.
Differences compared to 2024:
Here's a table summarizing the changes:
| Category | 2024 Rate (£) | 2025 Rate (£) | Increase (£) | Increase (%) |
|---|---|---|---|---|
| National Living Wage (21+) | 11.44 | 12.21 | 0.77 | 6.7 |
| 18-20 Year Old Rate | 8.60 | 10.00 | 1.40 | 16.3 |
| 16-17 Year Old Rate | 6.40 | 7.55 | 1.15 | 18 |
| Apprentice Rate | 6.40 | 7.55 | 1.15 | 18 |
What happens to other wages when minimum wage increases
1. Direct impact on low-wage workers:
- Workers earning below the new minimum wage: These workers see an immediate increase in their pay to meet the new legal minimum. This is the most direct and obvious effect.
2. Spillover effects:
- Workers earning slightly above the previous minimum wage: Employers may choose to increase the wages of workers earning slightly above the old minimum to maintain some level of pay difference between different roles and levels of experience. This is known as a "spillover effect" or "wage compression."
- Pressure to maintain pay differentials: If the minimum wage increases significantly, workers at higher pay levels may also seek pay increases to maintain their relative position in the pay structure. This can lead to upward pressure on wages across the board, although this effect tends to be weaker further up the pay scale.
3. Impact on wage inequality:
- Reduced wage inequality at the bottom: By boosting the earnings of the lowest-paid workers, minimum wage increases can help to reduce wage inequality, particularly at the bottom end of the pay distribution.
- Limited impact on overall inequality: While minimum wage increases can reduce inequality at the bottom, they may have a limited impact on overall wage inequality, as they don't directly affect the highest earners.
4. Employer responses:
- Absorbing costs: Some employers may absorb the increased labor costs by accepting lower profits or increasing prices slightly.
- Reducing other costs: Employers might seek to reduce other costs, such as by improving efficiency or reducing non-wage benefits.
- Adjusting staffing levels: In some cases, employers might respond by reducing hiring or even laying off staff, although research suggests that this effect is generally small in the UK context.
Important Considerations:
- Magnitude of the increase: The size of the minimum wage increase influences the extent of the spillover effects. Larger increases tend to have a greater impact on wages further up the pay scale.
- State of the economy: The impact on other wages can also depend on the overall state of the economy. In a strong economy with low unemployment, employers may be more willing to increase wages to attract and retain workers.
- Sectoral differences: The impact can vary across different sectors. Sectors with a higher proportion of low-wage workers, such as hospitality and retail, are likely to see a more pronounced effect on wages.
Overall, while the primary effect of a minimum wage increase is to raise the pay of the lowest-paid workers, it can also lead to upward pressure on other wages, particularly for those earning slightly above the previous minimum. The extent of these spillover effects depends on various factors, including the size of the increase, the state of the economy, and the specific sector.
Who is entitled to the minimum wage?
Almost all workers in the UK are legally entitled to be paid at least the National Minimum Wage (NMW).
As an employer in the UK, it's crucial to understand your legal obligations regarding the National Minimum Wage (NMW). Here's a breakdown from an employer's perspective:
Who you must pay the NMW to:
- Employees: This covers the majority of your workforce who operate under a contract of employment.
- Workers: This is a broader category including agency workers, casual staff, and those on zero-hour contracts. Essentially, anyone working under your direction and control, even without a formal employment contract, is likely considered a "worker."
- Age-related rates: You must pay at least the correct minimum wage rate according to the worker's age. This means keeping accurate records of employee ages and applying the appropriate rate:
- 21 and over: The National Living Wage (NLW) is the highest rate and applies here.
- 18 to 20: A specific rate applies to this age group.
- Under 18: A lower rate applies.
- Apprentices: You must pay apprentices at least the apprentice rate if they are under 19, or if they are 19 or over and in the first year of their apprenticeship. After the first year, apprentices aged 19 or over are entitled to the minimum wage for their age group.
- Payment method is irrelevant: Whether you pay hourly, weekly, monthly, or by piecework, you must ensure that the average hourly rate meets or exceeds the NMW.
Who you generally don't need to pay the NMW to:
- Genuinely self-employed individuals: These are people running their own independent businesses, not working under your control. The distinction can be complex, so seek professional advice if you're unsure. Key factors include control over work methods, provision of own equipment, and financial risk.
- Volunteers: People working for charities or voluntary organizations without any form of payment.
- Members of the armed forces.
- Those on specific government schemes where NMW doesn't apply.
- Family members living in the family home doing tasks for the family business (in some specific circumstances).
Important considerations for employers:
Here are some key points employers should keep in mind:
- Contractual obligations are superseded by NMW: Even if an employment contract states a lower wage, you are legally obliged to pay at least the NMW. Any clause attempting to circumvent this is legally void.
- Record-keeping is essential: Maintain accurate records of hours worked and payments made to demonstrate compliance with NMW regulations.
- Penalties for non-compliance: Failure to pay the NMW can result in significant penalties, including fines and being publicly named by the government.
- Seek professional advice: If you are unsure about any aspect of NMW compliance, consult with an employment law specialist or Acas. Correctly classifying workers (employee vs. worker vs. self-employed) is particularly important.
By understanding and adhering to these regulations, you can ensure legal compliance and avoid potential penalties.
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Night shift minimum wage
There is no separate minimum wage for night shifts in the UK. The National Living Wage and National Minimum Wage apply equally to all working hours, regardless of whether they fall during the day, night, or weekends.
However, it's important to note that:
- Working Time Regulations: These regulations state that night workers have the right to a free health assessment and that their average working hours should not exceed 8 hours in a 24-hour period.
- Some employers may offer additional compensation for overnight shifts due to the inconvenience and disruption to sleep patterns. This is not mandated by law, but it is a common practice in certain industries.
- While overtime pay rules are the same for day and night shifts, the night hours potentially contribute to more overtime pay if the shift extends beyond standard daytime working hours.
So, while there's no specific night shift premium built into the minimum wage, employees may still receive additional compensation from their employer.
Is minimum wage taxed in the UK?
Yes, minimum wage in the UK is subject to taxation, just like any other income. Here's how it works:
As an employer, you are legally responsible for deducting Income Tax and National Insurance contributions (NICs) from your employees' wages, including those earning minimum wage, through the Pay As You Earn (PAYE) system.
Income Tax:
- Personal Allowance: Every employee has a Personal Allowance (currently £12,570 for the 2024/25 tax year) which is the amount they can earn tax-free. You don't deduct income tax on earnings below this threshold for each individual employee.
- PAYE System: You operate the PAYE system, meaning you deduct income tax from your employees' pay based on their tax code and earnings above their Personal Allowance. You then pay these deductions to HMRC (Her Majesty's Revenue and Customs).
- Tax Codes: Each employee has a tax code that determines how much tax should be deducted. You receive these codes from HMRC and must apply them correctly.
- Minimum Wage Earners and Income Tax: Even if an employee is on minimum wage, if their total earnings from all sources exceed their Personal Allowance, they will be liable for income tax, and you are responsible for deducting it.
National Insurance Contributions (NICs):
- Earnings Threshold: You must start deducting NICs from your employees' earnings once they exceed the weekly earnings threshold (currently £242 per week for the 2024/25 tax year).
- Employer's NICs: In addition to deducting NICs from your employees' pay, you, as the employer, also have to pay Employer's NICs on your employees' earnings above a certain threshold. This is an additional cost for you as an employer.
- Minimum Wage Earners and NICs: Many minimum wage earners will earn above the NICs threshold, meaning you'll need to deduct employee NICs and pay employer NICs.
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Frequently Asked Questions
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Yes, the minimum wage applies to overtime hours, which are any hours worked beyond an employee's normal working hours. Employers must pay the appropriate minimum wage rate for all overtime worked.
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The National Living Wage is the higher rate of the minimum wage, which applies to workers aged 23 and over. The National Minimum Wage applies to workers under 23, with varying rates for different age groups.
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A de facto worker is someone who performs work for an employer but is not formally employed under a contract of employment. De facto workers are still entitled to the minimum wage.
Written by:
Rinaily Bonifacio
Rinaily is a renowned expert in the field of human resources with years of industry experience. With a passion for writing high-quality HR content, Rinaily brings a unique perspective to the challenges and opportunities of the modern workplace. As an experienced HR professional and content writer, She has contributed to leading publications in the field of HR.
Disclaimer
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