UK National Minimum Wage — what business owners need to know

Workers aged between 16 and 20 now qualify for the updated National Minimum Wage. Here’s what the new rates look like for employees in 2024.

Our experts

We are a team of writers, experimenters and researchers providing you with the best advice with zero bias or partiality.
Written and reviewed by:
Helena Young

When you’re paying employees, it’s crucial to understand the minimum wage requirements for workers and avoid a penalty from HMRC. Helpfully, as with all UK employee regulations, these are straightforward and easy to understand.

Just kidding.

The UK minimum wage bizarrely refers to two different levels of pay. The National Minimum Wage (NMW), which is for younger workers and some apprentices, and the National Living Wage (NLW), for members of staff aged 21 and over.

The subtle differences between these hourly wage rates can catch organisations off-guard. Our guide will help to clear up the confusion by laying out the latest UK minimum wage (for employees of all ages) in 2024 and what they mean for employers.

National Minimum Wage rates for 2024

All UK minimum wages, including the National Minimum Wage, are updated every April. The new figures are set by the Department for Business on the advice of an independent advisory group, the Low Pay Commission (LPC).

New rates for National Minimum Wage

Since April 1 2024, the National Minimum Wage applies to:

  • All workers aged 16 to 20
  • Apprentices aged 19 and under
  • Apprentices in their first year of training
21 to 2218 to 2016 to 17Apprentice
FY 2023/24£10.18£7.49 p/h£5.28 p/h£5.28 p/h
FY 2024/25N/A£8.60 p/h£6.40 p/h£6.40 p/h

What is the National Minimum Wage?

To young workers like myself, the idea of not having a standard minimum wage is difficult to comprehend. But the concept is still relatively new to the UK, having first become law in 1998 under Tony Blair’s Labour government.

The policy was aimed at providing greater support for lower-paid workers. Each year, the government is advised at what rate the minimum wage should be set to ensure low-income earners don’t fall into poverty.

Blair celebrated its unveiling in a party speech in 1999, stating: “two million people have had a pay rise because we believe they are worth more than poverty pay”.

At the time, the NMW was set at £3.60 an hour for those aged 22 and older, and £3 for 18-21-year-olds (a rate for 16–17-year-olds wouldn’t be established until 2004).

What is the National Living Wage?

Confusingly, in 2016 the Conservative party renamed the National Minimum Wage bracket for workers aged 23 and over to the rebranded National Living Wage. This rate differs from the NMW in that it is more closely (although not directly) tied to the cost of living.

While the latter increases by a set amount each year, the NLW is supposedly adjusted according to the rate of inflation. That makes it a more accurate measure of how much a person must earn to afford basic living costs in the UK, hence the name.

New rates for National Living Wage

In April 2024, the new National Living Wage was extended to employees aged 21 and over. 

This group will now earn at least £11.44 per hour (although campaigners for the Real Living Wage, which is directly tied to the cost of living, say this should actually be £12 per hour).

Here’s how the new Living Wage pay rates compare to previous years:

National Living Wage
FY 2023/24 (23 and over)£10.42 p/h
FY 2024/25 (21 and over)£11.44 p/h
Future changes to the UK minimum wage

2024 is an election year. Business owners are still catching their breath from the latest increase, but new National Minimum Wage rates might be announced again this year if an election is called before December.

Labour, who are currently leading the polls, will have a chance to improve on their NMW legacy. Party leader, Keir Starmer, has pledged to raise rates to at least £10 per hour for all workers if he becomes Prime Minister (and most business owners want him in).

Conversely, the Conservative party are living up to their name on any future rises. The government has pledged it will keep the minimum wage at around two-thirds of the average wage until at least 2025; giving respite to firms struggling to afford the cost.

UK minimum wage: legal responsibilities

There is no way to avoid paying the NMW and NLW that doesn’t result in breaking the law. All employers are legally required to pay their employees at least the minimum wage. 

Failure to comply could lead to a penalty of £20,000 fine, so it’s not worth the financial risk for cash-strapped SMEs (not to mention, hugely unethical for employers).

To protect against modern slavery – which remains a big issue in sectors like health and beauty – employers must store records using payroll software to prove they are paying at least the minimum.

This is an important line of defence for business owners. In a dispute at a tribunal or civil court, the burden is on the employer to prove that the minimum has been paid.

Who qualifies for UK minimum wages?

Businesses must pay the minimum wage standard to all employees including freelancers, agency staff, and those on zero-hours contracts. You must also pay trainees and those on probation within your business.

Workers who are not entitled to a UK minimum wage include:

  • Volunteers or voluntary workers
  • Family and non-family members living with you, such as au pairs and nannies
  • Workers younger than the school leaving age (those under 16)
  • Work placement students who work with you for up to a year
  • Students doing work experience as part of a higher education course
  • Friends and neighbours working on an informal basis
  • Employees on leave (including sick leave, maternity leave, and paternity leave)

How to afford the National Minimum Wage rise

An Office for National Statistics (ONS) report shows that most large employers already choose to pay staff of all ages the National Living Wage. This can be easier for payroll rather than adjusting thousands of young people’s payslips when they qualify for the higher wage.

SME budgets cannot accommodate this generosity, however. The latest update to the UK minimum wage saw pay increase by an average of 13% for workers on the NMW. This adds another £230 per month to the cost of employing a hypothetical, full-time 19-year-old worker.

That amount might sound small, but in today’s woeful economy it could be the nail in the coffin for businesses. In an employer survey by Startups, we found that, on average, 7% of all UK businesses would struggle to raise pay in 2024.

Particularly in sectors with tight profit margins, like retail, labour costs have wreaked havoc on SME budgets and caused many to press pause on wage rises.

While it will save on costs, that decision likely comes at great cost to recruitment, given a vast majority of firms expect workers to ask for a pay rise in 2024.

How to offset rising labour costs

Company owners should conduct a cash flow analysis to determine how they might offset the new minimum wage. Common cash preservation methods include:

It’s tempting to see minimum wage rises as just another layer of red tape designed to snare small business owners. But don’t underestimate the benefits of paying a competitive salary.

Your staff are one of your most important resources and their pay is a direct investment in your company. The above cost-saving measures can help lessen the impact of the change. If you plan accordingly, wage increases can be a bonus for both employer and employee.

Written by:
Helena Young
Helena is Lead Writer at Startups. As resident people and premises expert, she's an authority on topics such as business energy, office and coworking spaces, and project management software. With a background in PR and marketing, Helena also manages the Startups 100 Index and is passionate about giving early-stage startups a platform to boost their brands. From interviewing Wetherspoon's boss Tim Martin to spotting data-led working from home trends, her insight has been featured by major trade publications including the ICAEW, and news outlets like the BBC, ITV News, Daily Express, and HuffPost UK.

Leave a comment

Leave a reply

We value your comments but kindly requests all posts are on topic, constructive and respectful. Please review our commenting policy.

Back to Top