From April 2025, National Minimum Wage (NMW) rates will be rising across all age brackets following the recent Budget announcement by Chancellor Rachel Reeves.
With these changes, employers in sectors that often employ younger or lower-paid workers will need to prepare to avoid potential penalties and legal action.
Upcoming NMW rates
In line with Labour’s commitment to creating a unified adult wage, the new NMW rates from April 2025 will be:
- National Living Wage (21+ years): 6.7 per cent increase, from £11.45 to £12.21 per hour.
- 18-20 years: Up by £1.40, from £8.60 to £10.00 per hour.
- 16-17 years and apprentices: Increased by £1.15, from £6.40 to £7.55 per hour.
- Accommodation Offset: Now £10.66 per day.
For a full-time worker aged 21 or older, these changes represent an annual increase of approximately £1,400.
Employers should ensure they are ready to adopt these rates by April.
The cost of non-compliance
Failing to meet NMW standards can lead to costly penalties, including:
- Fines of up to 200 per cent of underpayments, capped at £20,000 per worker.
- Government “naming and shaming” for serial offenders.
- Employment Tribunal claims where workers seek back pay or compensation.
To avoid these risks, employers should begin preparations as soon as possible.
How to prepare for the NMW changes
Review employment contracts
Make sure all contracts reflect the updated NMW rates, especially for part-time, temporary, and younger workers.
Accurate hourly rates for each age group are essential.
Update payroll systems
Ensure payroll systems reflect the new rates to prevent accidental underpayment. This is important for implementation in April.
Assess pay structures
With NMW increases potentially narrowing pay gaps between junior and senior roles, consider adjustments to maintain fair pay differentials and prevent possible dissatisfaction or equal pay claims.
Train HR and payroll teams
HR and payroll teams should be fully briefed on the changes, with access to updated resources like employee handbooks and onboarding guides.
Implement regular wage audits
Regular audits can help identify any underpayment issues, ensuring all employees are paid above the new NMW rates.
Keep clear, secure records of these audits as part of compliance management.
As NMW rates rise, employees may keep a closer eye on their pay, increasing the need for transparency.
For support in implementing these changes smoothly, speak with our team today.