National minimum wage


Last Modified  29 September 2016

The national minimum wage (NMW) applies to all workers and is paid at different rates according to age. There is a separate rate for apprentices and from April 2016 a new National Living Wage (NLW) applies to workers aged 25 and over. The current and future rates for the minimum wage (which represents gross pay) are as follows:

AgeRate from 1 October 2015Rate from 1 April 2016Rate from 1 October 2016
Workers aged 25 and over (NLW)n/a£7.20 an hour£7.20 an hour
Workers aged 21 and over£6.70 an hour£6.70 an hour£6.95 an hour
Development rate for workers aged 18-20£5.30 an hour£5.30 an hour£5.55 an hour
Young workers rate for workers aged 16-17£3.87 an hour£3.87 an hour£4.00 an hour
Apprentices under 19, or over 19 and in the first year of the apprenticeship£3.30 an hour£3.30 an hour£3.40 an hour

Employers paying output workers, including home workers, piece rates (payment according to the number of items produced or tasks completed) must either pay the minimum wage for every hour worked, or a 'fair piece rate' (currently set at 120 per cent of the NMW). 

The minimum wage rates are reviewed annually and have been updated in October, but from 2017 they will be updated in April (see 'Recent developments' below).

Key points

  • All workers, except those who are genuinely self-employed, are entitled to receive the NMW/NLW
  • Gross pay is used to calculate whether an eligible worker has been paid the minimum wage
  • The NMW/NLW is calculated by including most financial awards or payments, but excluding allowances such as regional or on-call allowances, unsocial hours payments, tips and gratuities, or any benefits in kind, with the exception of accommodation up to a specified amount
  • Employers can average the hourly rate of pay over the pay period
  • Non-compliance can result in an enforcement notice requiring the employer to pay the difference between what was actually paid and what the worker should have received under the NMW legislation. Further non-compliance could result in the issue of a penalty notice and financial penalties.

Recent developments

National minimum wage and National living wage
The new National Living Wage (NLW) for workers aged 25 and over, set at £7.20 (the 2015 over-21 NMW rate plus a premium of 50p), applies from 1 April 2016. The government expects the rate to rise to over £9 by 2020 (a government policy paper explains the thinking behind the NLW).

The government has announced increases to the National Minimum Wage rates to take effect from 1 October 2016. From 2017, increases to both the NLW and NMW will take place in April.

The Low Pay Commission, which advises the government on the NMW rate, has been asked to recommend appropriate levels for both the NMW and the NLW (see NMW: Low Pay Commission remit 2016).