If you employ even one person in the UK, the National Minimum Wage is not a detail you can safely leave to payroll software alone. It is a legal floor, and falling below it — even by a few pence an hour, even by accident — can cost arrears, a penalty of up to twice the amount owed, and a public naming. This guide sets out the current rates, the rates confirmed for April 2027, what a minimum-wage worker really costs, and the seven traps that catch otherwise careful employers.
The rates that apply now, and the rates confirmed for April 2027
From 1 April 2026, the statutory hourly rates are £12.71 for workers aged 21 and over (the National Living Wage), £10.85 for workers aged 18 to 20, and £8.00 for workers under 18 who are above school leaving age and for qualifying apprentices. Those rates apply across the whole of the UK, and the size of your business makes no difference: a business with one employee has exactly the same obligation as a business with one hundred.
The next rise is already confirmed. In the Budget on 28 October 2026, the Government accepted the Low Pay Commission’s recommendations in full. From 1 April 2027, the National Living Wage rises by 3.9 per cent to £13.21 an hour, the 18 to 20 rate rises to £11.27, and the under-18 and apprentice rates rise to £8.31. The accommodation offset — the maximum daily amount that can count towards pay when you provide living accommodation — rises to £11.53 a day, from £11.10 a day in 2026.
Do not confuse the statutory rates with the voluntary Real Living Wage (£14.10 an hour outside London and £15.45 in London, announced October 2026): those are living-cost benchmarks, not legal minimums, and HMRC will only enforce the statutory rates above.
A 50p rise sounds small until you multiply it. For a full-time worker on 37.5 hours a week, 50p an hour is £18.75 a week, or £975 over a 52-week year, before employer National Insurance and pension costs. For a team of four full-time staff on the National Living Wage, that is £3,900 a year in wages alone. Budget for the rise now, in November, rather than discovering it in your April payroll run.
What a minimum-wage worker really costs you
The hourly rate is only the starting point. For 2026/27, employers pay employer National Insurance at 15 per cent on earnings above the £5,000 secondary threshold, and the employer minimum under the auto-enrolment workplace pension is 3 per cent of qualifying earnings, broadly earnings between £6,240 and £50,270. Both rise automatically when the minimum wage rises.
Take a full-time worker on 37.5 hours a week at £12.71. Annual gross pay is £24,784.50; employer National Insurance is about £2,968 and the employer pension about £556, giving a total of roughly £28,309 a year before training and equipment. At £13.21 from April 2027, pay becomes £25,759.50, National Insurance about £3,114 and pension about £586 — roughly £29,459, an increase of about £1,150 a year for one worker. The payroll mechanics are covered in our guide to payroll for small businesses, and the two on-costs in our guides to employer National Insurance contributions and the auto-enrolment workplace pension.
Who is covered, and who is not
Almost all workers are entitled to at least the minimum wage, including part-time workers, casual workers, agency workers and workers on zero-hours contracts. Apprentices, trainees and workers on probation are covered too, although apprentices have their own rate in the circumstances described below.
The main exceptions are genuinely self-employed contractors, company directors without an employment contract, volunteers, and family members living in the employer’s home. Workers below school leaving age are also excluded. If you are unsure whether someone is a worker or genuinely self-employed, do not guess: the label in the contract matters far less than the reality of the arrangement.
The seven traps that cause accidental underpayment
Most underpayment is not deliberate. HMRC names hundreds of employers every year, and the causes repeat themselves. Here are the seven to check.
1. Deductions for uniforms, equipment and other job costs
If you deduct the cost of a uniform, tools, safety equipment or a DBS check from pay, or you require the worker to buy them, that amount can count as a reduction in pay for minimum wage purposes. A worker paid exactly £12.71 an hour who pays £10 a week for a compulsory uniform is, in HMRC’s calculation, paid below the floor. Either provide required items free of charge or pay a rate with enough headroom above the minimum to absorb the cost.
2. Unpaid working time
HMRC divides what you actually paid by the hours the worker actually worked. Time spent opening up, closing down, attending mandatory training, travelling between assignments or undergoing security checks therefore counts, even if your rota does not. Twenty minutes of unpaid closing-up five nights a week is enough to push a worker on the exact minimum wage below the legal floor.
3. Salary sacrifice that dips below the floor
Salary sacrifice arrangements, such as pension contributions above the minimum or cycle-to-work schemes, are lawful — but only down to the minimum wage. It is the reduced cash pay that counts, not the value of the benefit. Payroll should be set up so that lower-paid workers cannot sacrifice their pay below the floor, and you should re-check the position every April and after every birthday that moves a worker into a higher band.
4. Missing the April rise, or a birthday rise
Rates normally change each April, and they apply from the first pay reference period beginning on or after 1 April — not from the next month, and not when you get around to it. The same applies when a worker’s birthday moves them from the 18 to 20 band to the National Living Wage. Diary both dates, and check that payroll has actually applied them before the first affected pay run.
5. Getting the apprentice rate wrong
The apprentice rate of £8.00 (rising to £8.31 in April 2027) applies only to apprentices aged under 19, or aged 19 and over who are in the first year of their apprenticeship. Once an apprentice aged 19 or over completes the first year, they must be paid the rate for their age group. Apprentice errors account for roughly a fifth of named cases in past HMRC rounds, usually because nobody diarised the end of the first year.
6. Tips, bonuses and the wrong pay elements
Tips and service charges do not count towards the minimum wage. If your pay structure relies on tips or discretionary bonuses to reach the hourly floor, it is not compliant. Base pay, before such extras, must clear the floor for every hour worked.
7. Rounding, day rates and salaried hours
Paying a day rate, a weekly rate or a monthly salary does not remove the hourly test. HMRC will still divide pay by hours worked. Rounding clock-in times down, paying for “regular” hours while the worker regularly works longer, and failing to record overtime are all common sources of arrears. If hours vary, record the hours actually worked rather than the hours you planned.
What happens if HMRC finds underpayment
HMRC can require arrears repaid at the current rates rather than the rates in force when the underpayment happened, which makes old errors more expensive. On top of arrears, it can impose a penalty of 200 per cent of the amount owed (minimum £100, maximum £20,000 per worker), halved if you comply within 14 days. Employers with total arrears of £500 or more can also be publicly named, with a lower threshold for repeat cases. HMRC can investigate arrears going back up to six years, so keep detailed records of hours, pay and deductions well beyond the current year. If you discover an error yourself, repaying workers promptly, before an investigation begins, puts you in a far stronger position.
Your April 2027 checklist
Work through this list before the end of March 2027. First, update your budget for £13.21, £11.27 and £8.31, including employer National Insurance and pension. Second, confirm payroll has the new rates loaded for the first pay period beginning on or after 1 April. Third, review salary sacrifice and deductions for uniforms, equipment and training, checking none takes a worker below the new floor. Fourth, audit unpaid time: opening, closing, training, travel between jobs and security checks. Fifth, list every apprentice and note the end of their first year. Sixth, diarise birthdays that move workers into a higher band during 2027. Finally, tell staff what is changing and when, and set the rate correctly in the employment contract.
The bottom line
Treat the National Minimum Wage as a calculation, not a headline rate. Get the April 2026 rates right, budget now for £13.21 from April 2027, price in employer National Insurance and pension, and audit the seven traps: deductions, unpaid time, salary sacrifice, missed uplifts, apprentice errors, ineligible pay elements and unrecorded hours. That is a morning’s work, and it is far cheaper than arrears, a 200 per cent penalty and a place on HMRC’s naming list.
This article is general information for UK small business employers, not legal or tax advice. Rates and thresholds change, so check the current GOV.UK guidance and take professional advice before acting on a specific case.
