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From 6 January 2024, the main rate of class 1 National Insurance contributions (NIC) deducted from employees’ wages is reduced from 12% to 10%. From 6 April 2024, the main rate of self-employed class 4 NIC will reduce from 9% to 8% and class 2 NIC will no longer be due. Those with profits below £6,725 a year can continue to pay class 2 NIC to keep their entitlement to certain state benefits. Our guidance will be updated in full in spring 2024.

Updated on 6 April 2023

National minimum wage

Under UK law, employees and ‘workers’ are entitled to certain rights, including a minimum wage. We explain what the current national minimum wage (NMW) is and what you should do if you do not receive it. If you are 23 or over, there is also the national living wage (NLW), which we explain below.

Content on this page:

Basics

The NMW is an hourly rate set by the Department for Business and Trade (DBT) and enforced by HM Revenue & Customs (HMRC). There are different rates depending on your age and if you are an apprentice. The NMW means that you should receive at least a specified amount of pay per hour for the hours worked in your pay period, for example, a week or a month.

The NLW was introduced from 1 April 2016 and is essentially a premium on top of the NMW. Originally it was for workers aged 25 and over who were not in the first year of their apprenticeship. Since 1 April 2021, it is for workers aged 23 and over, who are not in the first year of an apprenticeship. While the NLW operates as a higher level of NMW, the same rules apply to both.

Entitlement

Almost all employees and ‘workers’ over school leaving age in the UK are entitled to receive the NMW or NLW – this includes full and part-time employees, agency workers, migrant workers and casual workers.

A ‘worker’ is someone who basically undertakes to do or perform personally any work or services. Their contract is not with their own client or customer but with someone else’s business. Their work arrangements tend to be 'midway' between self-employment and employment. 

You should note that even if you are ‘self-employed’ for tax purposes, you may still be entitled to the minimum wage if you fall under the definition of a ‘worker’. We look at the concept of ‘worker’ in our employment status guidance.

There is an exemption from being paid the minimum wage for certain family members and domestic workers like au pairs or nannies who live as part of someone else’s family. You can read more about the exemption in this HMRC guidance.

In addition, some other types of workers are not entitled to the minimum wage, for example, members of the armed forces, some company directors and ‘office holders’, those on certain government schemes and most volunteers. You can find out more about who is not entitled to the minimum wage on GOV.UK.

Current rates

NMW and NLW rates: per hour From 1 April 2023 (£)
Age 23 and over (national living wage)

10.42

Age 21 and 22

10.18

Age 18 to 20

7.49

Age 16 to 17

5.28

Apprentice rate – payable to all apprentices under the age of 19 and to any apprentice in the first year of their apprenticeship, regardless of age

5.28

You can find the previous years’ rates on GOV.UK.

The NMW and NLW rates are usually amended on 1 April each year.

Work out if you have been paid the NMW

The minimum wage rules are usually straightforward to understand and apply where you are paid on an hourly basis for the number of hours worked each week or month. The rules are more complex where you are paid an annual salary or are paid per task you perform or piece of work you do (known as ‘piece work’).

For salaried work, the rules say you can be paid a regular and consistent wage, so long as the total number of hours worked over a year are paid at the NMW or NLW on average. For piece work, you must be paid either at least the NMW or NLW for every hour worked or on the basis of a ‘fair rate’ for each task or piece of work you do. If the work you are doing is not hourly paid, salaried or piece work, then you may be subject to the ‘unmeasured work’ rules.

Read more about how to work out the minimum wage using these systems on GOV.UK. Read more about the rules if you are paid by the hour, below.

Hourly paid calculation

If you are paid on an hourly basis, the calculation involves taking your ‘minimum wage pay’ and dividing it by the number of hours worked in the pay period. The result should be equal to or above the minimum hourly rate for your age. So, for example, if you are aged 25, the answer should be £10.42 or higher.

Your ‘minimum wage pay’ is the amount of pay you receive, before things like tax, National Insurance and pension contributions have been taken off, but after certain other deductions have been made – including for costs you have incurred in connection with your work that are not reimbursed by your employer (more on this below in 'Some problem areas').

Example: Alan

Alan worked 25 hours last week and he earned £260.50. He is 28 and is eligible for the minimum wage rate of £10.42 per hour. £260.50 divided by 25 is £10.42 so Alan has been paid the minimum wage.

The next week Alan works an hour overtime. Even though this is outside his normal pattern, he would need to be paid £270.92 (£10.42 multiplied by 26).

‘Working’ includes training (more on this below in 'Some problem areas'), clocking in and out time, being on call and working overtime or through breaks. You should note that you are not usually entitled to be paid the minimum wage for your lunch breaks, provided you are resting. There are some useful examples looking at minimum wage and lunch breaks/rest breaks on GOV.UK.

When a new rate should apply from

The rules say that any new rate (that is, for those turning 18, 21 or 23) starts from the beginning of the next pay period. People naturally think that if they are paid calendar monthly and turn 23 (say) on the 15 August, then they should be paid the higher rate for the rest of the month. But actually, they are only entitled to it from the beginning of the following pay period, that is, 1 September.

These same rules apply to apprentices – that is, for those turning 19 and/or for those moving into the second year of their apprenticeship. They also apply when the rates are amended on 1 April. 

Accepting less than the NMW or the NLW

Your employer cannot pay you less than the NMW, or the NLW if you are entitled to it, even if you are willing to accept it. If you are not being paid the minimum wage because you are being treated as self-employed and you do not think this is correct, read our guidance on False self-employment.

Some problem areas

There are some complex minimum wage areas to be aware of (which some unscrupulous employers may try and use to their advantage). We look at some of them here:

Tips

Employers must pay their employees at least the NMW or NLW as appropriate, regardless of any additional tips, gratuities, or service charges they may obtain as part of their job. In other words, workers entitled to the NMW/NLW must get at least the NMW/NLW in base pay with any tips being paid on top.

Deductions from pay

Your employer cannot make deductions from your pay in respect of items or expenses that they have provided that are necessary for your employment (such as for a uniform or protective clothes) if these deductions bring down your pay rate below the NMW or NLW.

Similarly, if you incur costs for things connected with the job, which are not reimbursed by your employer, then these will also have the effect of reducing the amount of pay you are taken to have received from your employer. So, even if you have to pay for an item of ‘everyday’ unbranded clothing to wear as part of a uniform, such as a pair of black trousers, black shoes or a white shirt, the cost incurred must be deducted from your pay to establish whether at least the minimum wage is being paid. This is often overlooked by employers.

Example: Jenny

Jenny (over 23) is paid £10.42 an hour for 40 hours per week. Jenny has earned £416.80 but then a deduction of £55 is made for a uniform that she has been given, so she only received £361.80 or the equivalent of £9.05 an hour, which is below the NLW.

This rule applies in the context of fuel costs for staff who have to use their own car for work. This means if you are on the minimum wage, your employer may need to pay you more to prevent an underpayment arising. More on this in 'Travel time and costs' below.

Workers may opt into things like Christmas Clubs because it helps them save, or because it gives them access to the employer’s goods and services at a discounted price. Nevertheless, we understand that HMRC’s view is that any such deductions made from pay by an employer can reduce the amount the worker is taken to have received, because they are for the employer’s own use and benefit.

Accommodation 

If your employer provides you with accommodation as part of the job (including things like electricity, laundry costs, etc.), they can count some of its value towards NMW or NLW pay. Your employer cannot count more than the accommodation offset rate which is in force at any given time.

The maximum offset rate for accommodation is currently £9.10 a day or £63.70 a week. If an employer charges more than this, the difference is taken off your pay that counts towards the NMW or NLW.

Example: Winn

Winn, who is 23 years old, is paid £10.65 an hour for 40 hours work (£426 per week). But he stays in the employer’s accommodation and the employer charges him £85 per week for his bed and board. Under the accommodation offset rules, the employer is allowed to consider £63.70 per week as pay for minimum wage purposes. So whilst Dave actually only receives £341 in pay (£426 less £85), he is deemed to receive £404.70 (£341 plus £63.70). However, the deemed amount of wages is less than the minimum wage rate for his 40 hours work, as it only amounts to £10.12 an hour (£404.70 divided by 40), rather than £10.42.

On the other hand, if the accommodation is free, the offset rate is added to your pay.

Example: John

John, 27, is a carer, and is paid £9.00 per hour for 30 hours work a week, which totals £270. He is given free accommodation 7 days a week, which the law says is worth a notional amount of £63.70. This means John has earned the equivalent of £333.70 (£270 plus £63.70). If we divide this by the number of hours John has worked (30) this brings John’s pay up to £11.12 an hour, which is above the minimum wage rate of £10.42.

If you are charged the same as or less than the accommodation offset rate for accommodation, it does not have an effect on your pay.

The accommodation offset rate is amended on 1 April every year.

You can find more information on the accommodation offset rules on GOV.UK

Training time

Where workers undergo training (for example – employment induction or skills development), the time spent on such activities is working time for minimum wage purposes where a contract of employment has started or where it is a contractual requirement for the worker to attend the training.

However, where prospective workers attend pre-employment induction events to assess their suitability for employment or as part of the job application process, then this would not count as working time and is exempt from the minimum wage rules. You can see what other things count and do not count as working time on GOV.UK.

Travel time and costs

Whilst it is not a requirement under minimum wage law for an employer to make separate payments to workers for their travel time, workers should be paid at least the NMW/NLW rate for all hours worked, including travel time and out of pocket expenses such as travel costs (‘travel’ in this context means travel in connection with work but not travel from home to place of work).

For minimum wage purposes, we understand that where workers are using their own cars to travel in connection with work, ‘costs’ are actual fuel expenses, rather than a flat rate like for tax. If you use your car for both work and private purposes, it can be hard to work out the specific cost of the fuel used in travelling for work. However, if you keep a mileage log (of both work miles and total miles) and fuel receipts, the percentage of work use can be identified and so, therefore, can your costs.

All of this means that, in practice, employers need to reimburse fuel costs in full on top of a NMW hourly base rate for workers who are on or around the NMW. This will ensure the employer does not fall foul of the NMW rules. Alternatively, employers need to increase the worker’s hourly base rate so that there is enough ‘head room’ in it, to absorb the fuel costs without taking their average pay below the NMW.

Example: Wali

Wali is 35 years old and is paid weekly. Last week she was paid £10.60 per hour for 30 hours work (£318). However, Wali spent 3 unpaid hours that week travelling to a business meeting, so the minimum amount to be paid to her should be £10.42 x 33 hours – £343.86. Wali has been paid below the NLW. Her employer needs to top up her pay by at least £25.86 so that the NLW rules are met.

If Wali also incurred £20 of travel costs for those three hours of travelling, her pay would be taken to be £298. When we compare this to the bare minimum she should have received, £343.86, she has been underpaid by £45.86.

Care workers, who are often required to travel extensively to visit people in their own homes, should try and understand the travel time rules to make sure they are being applied correctly. We look at the minimum wage, tax and tax credit/universal credit rules, as they apply to care workers on our page Minimum wage, tax and tax credits help for care workers.

Interns

Any intern who has a contractual relationship with their employer must be paid at least the NMW for the hours they have worked. You can find more information about interns on our dedicated Interns page.

Premium rates of pay

The principle of the NMW rules is that a worker’s basic minimum wage pay, before enhancements or other allowances should not fall below the NMW/NLW.

This means that if you are paid at a higher rate than your standard pay rate for some of the work you do – for example for working on weekends or bank holidays, the premium element of pay – that is, the amount the higher pay rate exceeds your basic rate – does not count towards minimum wage pay.

Example: Carrie

Carrie (aged 19) is paid weekly. Last week she was paid £235 for 31 hours work, which averages £7.58 an hour. On the face of it, £7.58 per hour looks like it meets the applicable NMW rate (£7.49), but actually, eight of the hours were paid at £8 for a Sunday shift, which included an 85p premium per hour.

If we strip out the ‘premium’ amount she received for her Sunday shift (eight hours x 85p premium = £6.80), Carrie’s basic rate actually works out at £7.36 which is below the minimum wage (£228.20 divided by 31).

Salary sacrifice

Under a salary sacrifice arrangement, an employee is able to swap cash salary for non-cash benefits like pension contributions, cycle to work or childcare vouchers (childcare vouchers are closed to new recipients from October 2018).

If you are on or just above the minimum wage, then you should not be in a salary sacrifice arrangement. This is because the minimum wage rules essentially mean that a salary sacrifice arrangement cannot reduce your cash earnings below the appropriate minimum wage rate.

If you are slightly higher up the income scale, you should be aware that an increase in the minimum wage rate may affect your ability to salary sacrifice.

Example: Neena

Neena, 38, works as a cleaner. She generally works around 35 hours a week at £11.80 an hour. At the moment she can give up £48.30 of her £413 weekly pay packet and get childcare vouchers instead (bringing her cash pay down to £364.70 but still at the minimum wage rate of £10.42 per hour) and saving her tax of £9.66 and NIC of £5.80, a total of £15.46 each week.

If the minimum wage rate for her circumstances goes up to, say £10.70 in April 2024, then assuming Neena still works 35 hours a week and does not have a pay rise, Neena would only be able to sacrifice around £38.50 of her pay for childcare vouchers, as the minimum amount of cash that her employer must pay her is now £374.50.

Other areas

There is a comprehensive employer guide to calculating the NMW and NLW produced by the DBT that you may find helpful as it covers other complex topics like salaried workers and sleeping in time. Although it is aimed at employers, employees may find it useful too when trying to understand the rules and self-check their position.

What to do if you are being underpaid

If you think you are not getting the NMW or NLW, you should talk to your employer. Your employer needs to put right any minimum wage underpayment by paying the arrears they owe you. More on this below.

At this stage, your employer can fix any issues ‘informally’ themselves, without having to involve the authorities. This is because the law allows an employer to pay an additional amount of wages to self-correct an underpayment of NMW or NLW. However, employers have to do this accurately. It is also important that when they pay any extra amount to you that it is clearly identified as NMW or NLW arrears. As part of the self-correction process, they must check back up to six years to make sure there have been no similar failings.

If that does not work, you can contact a confidential helpline (ACAS Pay and Work Rights Helpline) to help you solve any dispute. You can find the telephone number on GOV.UK.

Complaints can be passed to HMRC (who enforce the minimum wage rules) by ACAS to investigate, as required. Alternatively, you can use an online form to make a complaint directly to HMRC (or take your employer to an Employment Tribunal yourself although there are strict time limits for this).

It is important to understand that HMRC will investigate 100% of complaints they receive. Complaints can be made anonymously by workers and once received, HMRC will start an investigation against an employer, covering all aspects of NMW/NLW risk, not just the complaint itself.

If HMRC decide that the employer has not paid the minimum wage, the employer will be sent a notice telling them that they must pay you the arrears and they may also be given a penalty.

Receiving arrears

Any minimum wage arrears you are due should be repaid to you at current rates for all the periods they were underpaid, even if these are higher than the rate that applied when the arrears arose. This is in recognition of loss of purchase power you may have suffered from the initial underpayment.

The way that you work out the amount you should be paid is by using the formula (underpayment/original rate) x current rate.

Example: Jane

Jane, who is 38, works out that she was underpaid the minimum wage by £274.05, by a homecare company that she worked for during the period May to September 2018. During this time, her minimum wage rate was £7.83. However, it is now £10.42. Rather than pay Jane the £274.05, the homecare provider must pay Jane £364.70 (that is, £274.05 divided by £7.83 multiplied by £10.42).

When it comes to how the £364.70 should be taxed when it is paid to Jane, ultimately, it should be allocated back to the tax year to which it relates (2018/19) and the tax calculated on it as if it were paid in that year (meaning that if Jane’s total earnings, including the minimum wage arrears, were below the personal allowance, then no income tax would be due).

Even so, the employer will very probably operate Pay As You Earn (PAYE) tax at the time they pay the arrears and in a way that means she will have some tax deducted, so she will need to claim a refund. Jane should contact HMRC National Insurance Contributions and Employer Office at HMRC, BX9 1AS, to arrange a refund, quoting the guidance in HMRC’s PAYE manual.

Please note that the rules are a bit different for NIC – it is calculated on the basis of the year the payment is made only: it is not related back to prior years.

Finally, you should be aware that such arrears payments may impact any benefits or tax credits you receive, so it is vital that you tell the relevant authorities about any minimum wage arrears as soon as possible (even if they then go on to disregard the increase in income for whatever reason).

You can find out more on what to do if your employer refuses payment, on GOV.UK.

Getting more help

You can get more help by contacting the ACAS helpline for help in the following employment areas:

  • the NMW/NLW
  • working in agriculture
  • using employment agencies
  • working time limits
  • using a gangmaster

You can find the telephone number on GOV.UK. The helpline takes calls in over 100 languages.

For further help on the minimum wage, we suggest you look at GOV.UK.

For more technical/in-depth guidance, see HMRC’s national minimum wage manual.

We have a lot of information on the minimum wage for employers on our page Minimum wage: information for employers, which may also be useful for employees. 

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