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What is the national minimum wage? A guide for employers

4-minute read

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Catriona Smith

Catriona Smith

19 February 2023

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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.

National minimum wage 2024 – guide for employers

If you’re self-employed and running your own business or if you’re a company director, you aren’t entitled to national minimum wage or national living wage.

What is the National Minimum Wage Act 1998?

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.

National living wage vs minimum wage – what’s the difference?

In April 2016, the government introduced the national living wage (minimum rate of pay), intially for workers 25 and older. Since April 2021 more younger people have been eligible for the wage as the threshold moved to include anyone aged 23 and older. And from April 2024, the national living wage will apply to anyone aged 21 and older.

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 applies to workers aged 23+*
  • the minimum wage applies to workers aged 16 to 22
  • apprentices aged 16 and 17 get a different rate of pay

*The living wage will include 21 and 22 year olds from 1 April 2024.

When does the national minimum wage go up?

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 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. It's also been expanded it to include 21 and 22 year olds for the first time.

This national living wage rise will equal to two-thirds of median hourly pay for workers over the age of 21, following recommendations from the Low Pay Commission.

What is the current national minimum wage?

National minimum wage 2023

As mentioned earlier, the minimum wage currently applies to workers under the age of 23. These are the rates from April 2023:

  • 21 and 22 year olds - £10.18
  • 18, 19, 20 year olds - £7.49

From April 2024, a new rate will apply to those aged 20 and younger (see table below).

National minimum wage for 17 year old workers

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).

What are the rates from April 2024?

The national minimum wage and living wage rates from April 2024 are shown below.

Hourly rate (from April 2024)

% increase from 2023

National living wage (21 and older)

£11.44

9.8%

18-20 year old rate

£8.60

14.8%

16-17 year old rate

£6.40

21.2%

Apprentice rate

£6.40

21.2%

Accommodation offset

£9.99

9.8%

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.

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What’s the real living wage?

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’ for 2023-24 is £12 for the UK and slightly higher in London at £13.15.

Employers have until 1 May 2024 to implement the new rates (if this is something you voluntarily pay).

Cost of living vs minimum wage – what does it mean for businesses?

In its November 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 between 2021 and 2023, but in 2024 it's expected to recover some of the value lost during the cost of living crisis.

With inflation starting to fall, the real value of the national living wage is expected to improve. However, this year’s 9.7 per cent national living wage increase is expected to increase the real value.

The LPC said that the 9.7 per cent increase in the national living wage in April 2024 will be the highest value in real terms that the rate has ever reached.

Businesses need to keep payroll records

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.

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Photograph: StratfordProductions/stock.adobe.com
Catriona Smith

Written by

Catriona Smith

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

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