The UK Government has announced it has accepted the Low Pay Commission’s (LPC) recommendations for National Minimum Wage (NMW) and National Living Wage (NLW) rates, set to come into effect from 1 April 2025.
The new rates reflect considerable increases, with the Government citing the aim of supporting low-paid workers against rising living costs and bringing the NLW closer to two-thirds of median earnings, meeting government targets.
This is the first time the LPC has been specifically tasked with considering the cost of living and future inflation trends in its recommendations. The LPC’s proposals, which include insights from the Office for National Statistics (ONS) and economic projections from the Bank of England, are intended to ensure real-term wage growth and shield low-paid workers from inflationary pressures up until March 2026.
National Minimum Wage Rates 2025
The new NMW and NLW rates are as follows:
| NMW Rate | New Rate from 1 April 2025 | Current Rate from 1 April 2024 | Increase (£) |
|---|---|---|---|
| National Living Wage (21 and over) | £12.21 | £11.44 | £0.77 |
| 18-20 Year Old Rate | £10.00 | £8.60 | £1.40 |
| 16-17 Year Old Rate | £7.55 | £6.40 | £1.15 |
| Apprentice Rate | £7.55 | £6.40 | £1.15 |
| Accommodation Offset | £10.66 | £9.99 | £0.67 |
From April 2025, the NLW for workers aged 21 and over will rise to £12.21 per hour, a 6.7% increase. For younger workers, the NMW will see substantial raises, with the 18-20 age group rate increasing by 16.3% to £10.00 per hour, and the 16-17 age group and apprentice rates both going up by 18% to £7.55 per hour. The accommodation offset rate, an allowable deduction for employers providing accommodation, will also increase by 6.7% to £10.66 per day.
Background to the National Minimum Wage
The National Minimum Wage (NMW) and National Living Wage (NLW) are legally enforced, and employers are required to pay these rates to all qualifying workers. Non-compliance can result in significant fines and back-pay orders from HMRC, as seen in recent high-profile cases where major companies were penalised. The LPC, an independent body comprising employers, trade union representatives, and experts, is tasked with advising the government on wage thresholds and balancing wage increases with the risk of job losses or reduced hours for low-paid workers.
The NLW, introduced in 2016, originally applied to workers aged 25 and older, but over recent years, this threshold has been lowered, first to 23 in 2021 and to 21 in 2024. The Labour Government has signalled plans to lower this age threshold to 18, with the aim of gradually integrating younger workers into the NLW category.
It is important to note that the NLW differs from the Real Living Wage, a voluntary benchmark set by the Living Wage Foundation. This Real Living Wage is not legally mandated but is independently calculated based on the cost of living. It aims to offer a more sustainable income level for workers, particularly in London. For example, in May 2025, the Real Living Wage is set to rise to £13.85 in London and £12.60 elsewhere, benefiting nearly half a million UK workers employed by businesses that voluntarily adopt this rate.
Impact for Employers
To prepare for the upcoming changes to the National Minimum Wage (NMW) and National Living Wage (NLW) from April 2025, UK employers need to ensure their payroll systems are updated to reflect the new rates. This includes verifying that all employees over 21 are paid at least the NLW of £12.21 per hour and ensuring younger workers receive the new minimum rates applicable to their age groups.
Employers should review any current contracts, particularly for apprentices and younger employees, to ensure compliance with the updated rates and avoid underpayment, which could lead to fines and back-pay claims.
Employers providing accommodation to staff should adjust their accommodation offset deductions to the new rate of £10.66 per day. Organisations with employees who work varying hours or shifts will also need to monitor hours to avoid inadvertent underpayment, especially if the changes result in increased scheduling complexity.
HR and finance departments should work together to assess the financial impact of these wage increases on overall payroll expenses and make adjustments to budgeting and financial forecasts. Planning may include reallocating funds, identifying cost-saving measures, or revisiting pricing strategies to accommodate the increased wage costs.
Organisations that hire younger workers or apprentices should stay informed about the Government’s plan to extend the NLW to workers aged 18 and above in future years, as this may impact workforce planning and long-term financial forecasting.
Need Assistance?
For advice on how to prepare your organisation for the upcoming changes to the National Minimum Wage rates, contact DavidsonMorris.
Author
Founder and Managing Director Anne Morris is a fully qualified solicitor and trusted adviser to large corporates through to SMEs, providing strategic immigration and global mobility advice to support employers with UK operations to meet their workforce needs through corporate immigration.
She is a recognised by Legal 500 and Chambers as a legal expert and delivers Board-level advice on business migration and compliance risk management as well as overseeing the firm’s development of new client propositions and delivery of cost and time efficient processing of applications.
Anne is an active public speaker, immigration commentator, and immigration policy contributor and regularly hosts training sessions for employers and HR professionals
