Research and reports
The government sets a national minimum wage and a national living wage to guarantee the lowest paid workers get a minimum standard of pay. This is a legal requirement for all businesses of any size, so read on to make sure you’re complying with the latest rates and check the rules for different age groups and apprentices.
The National Minimum Wage Act 1998 was introduced to make sure that the lowest paid workers are paid fairly while protecting employment.
Be aware that employment contracts with a lower rate of pay aren’t legally binding – and not complying with the law on minimum wage can lead to an investigation from HMRC.
In April 2016, the government introduced a new minimum rate of pay for workers who are at least 25 years old – this is called the national living wage. And since April 2021 more younger people have been eligible for the wage as the threshold now includes anyone aged 23 and over.
While the rate isn't necessarily based on the cost of living, the government set a target to increase the living wage to two-thirds of median earnings of all employees across the country by 2024. This was achieved in 2021 following recommendations from the Low Pay Commission.
So to summarise, the difference between the national minimum wage and living wage is related to someone’s age:
*The living wage will include 21 and 22 year olds from 1 April 2024.
The minimum wage rates change every year on 1 April.
For example, the national living wage 2023 is £10.42 an hour, up 9.7 per cent from £9.50 in 2022.
The national minimum wage 2023 rate depends on the age of the employee (see more details below).
In the Autumn Statement, the Chancellor confirmed that the national living wage will increase to £11.44 from 1 April 2024. They also expanded it to include 21 and 22 year olds for the first time.
It's hoped this will achieve the government target for the national living wage to be equal to two-thirds of mediun hourly pay. And this follows recommendations from the Low Pay Commission.
As mentioned earlier, the minimum wage now applies to workers under the age of 23. These are the rates from April 2023:
In April 2023, the minimum wage rate for 16 and 17 year olds increased to £5.28 an hour (up from £4.81 in 2022).
The national minimum wage and living wage rates from April 2023 are shown below.
Current hourly rate (from April 2023)
% increase from 2022
National living wage
21-22 year old rate
18-20 year old rate
16-17 year old rate
To check if you’re paying the correct minimum or living wage to your employees, you can use the government’s national minimum wage calculator.
The national minimum wage shouldn’t be confused with the voluntary London Living Wage and UK Living Wage, which is calculated based on real living costs and isn’t connected to the government.
Set up by the Living Wage Foundation, the Living Wage is a campaign that encourages employers to pay a wage that reflects everyday costs in London and the UK. According to their data, the ‘real living wage’ in 2023 is £10.90 for the UK (up from £9.90 in 2022) and slightly higher in London at £11.95 (up from £11.05 in 2022).
In its April 2023 report on the national living wage, the Low Pay Commission (LPC) explained the effect of inflation on the real value of the wage.
It said the 'real value' of the national living wage had fallen, but it will likely rise again in 2023 and 2024.
With inflation reaching 10.4 per cent in February 2023, the real value of the naitonal living wage fell during March 2023. However, this year’s 9.7 per cent national living wage increase is expected to increase the real value.
The LPC said that the 6.6 per cent increase in the national living wage in April 2023 helped to restore some of the value, but that was lost as inflation remains high.
As a business owner it’s important to keep accurate records, and this includes proof that you’re paying employees at least the minimum wage. This could be payroll records to show total pay and hours worked as well as any contracts and agreements.
You must keep these records for at least six years if they were created on or after 1 April 2021 (or if you still had records on 31 March that you needed to keep under the previous three-year rule).
Our guide to record keeping goes into more detail about other records you have to keep for your business, and for how long. Or check out our comparison guide on the best accounting software out there for small businesses – some of which include a useful payroll feature.
Is there anything else you would like to know about the minimum and living wage? Let us know in the comments.
Catriona Smith is a content and marketing professional with 12 years’ experience across the financial services, higher education, and insurance sectors. She’s also a trained NCTJ Gold Standard journalist. As a Senior Copywriter at Simply Business, Catriona has in-depth knowledge of small business concerns and specialises in tax, marketing, and business operations. Catriona lives in the seaside city of Brighton where she’s also a freelance yoga teacher.
We create this content for general information purposes and it should not be taken as advice. Always take professional advice. Read our full disclaimer
6th Floor99 Gresham StreetLondonEC2V 7NG
Sol House29 St Katherine's StreetNorthamptonNN1 2QZ
© Copyright 2023 Simply Business. All Rights Reserved. Simply Business is a trading name of Xbridge Limited which is authorised and regulated by the Financial Conduct Authority (Financial Services Registration No: 313348). Xbridge Limited (No: 3967717) has its registered office at 6th Floor, 99 Gresham Street, London, EC2V 7NG.