The Government has confirmed that from 1 April 2025, the National Minimum Wage (NMW) and National Living Wage (NLW) rates will increase. This brings fresh compliance risks for employers — especially where wages sit close to the legal thresholds.

Here’s a quick summary of what’s changing, areas where employers can slip up, and why getting it wrong could cost you more than just back pay.

The New Wage Rates from April 2025

From 1 April 2025, the new statutory rates will be:

National Living Wage:

  • Aged 21 and over: Increasing from £11.44 to £12.21

National Minimum Wage:

  • Aged 18 to 20: Increasing from £8.60 to £10.00
  • Aged 16 and 17 and apprentices: Increasing from £6.40 to £7.55

The higher rate takes effect from the start of the next pay reference period following the increase. As a result, a worker’s pay may not increase immediately.

Where it can go wrong

A common misconception is that paying the headline hourly rate is enough. However, several routine practices can unintentionally result in pay falling below the legal minimum, including:

  • Deductions for uniforms or equipment: Where costs are passed to workers, these may bring pay below the minimum threshold.
  • Incorrect inclusion of overtime or premiums: Employers sometimes mistakenly factor in overtime, shift premiums, or bonuses when calculating compliance with the hourly rate.
  • Unpaid working time: Where an employer doesn’t pay for extra time worked before or after shifts.
  • On-call time: Failing to pay workers who are required to be at the workplace and available for work, even if not actively working.
  • Unpaid time spent travelling: This can include travel for the purposes of salaried hours work, time work, or output work.

It’s crucial to be aware of these potential errors, especially where pay is close to the minimum legal threshold.

Why It Matters

The risks of failing to comply are significant:

Financial Penalties: Employers who underpay face penalties of 200% of the total underpayment, capped at £20,000 per underpaid worker.

Reputational risk: HMRC regularly publishes a “name and shame” list of employers who fail to comply.

What Should Employers Do Now?

With the new rates coming into place soon, now is the time to:

  • Review pay structures and check how the new rates will impact staff pay.
  • Audit payroll processes to ensure deductions, unpaid time, and on-call arrangements don’t result in breaches.
  • Train managers and payroll teams on the practical application of minimum wage rules.

Being proactive now could prevent significant financial and reputational costs down the line.

Our employment experts can help ensure your business and its processes are compliant as well as providing specialist legal advice and support in the event of any allegations of non-compliance.

For help and advice, contact James Taylor at james.taylor@h-f.co.uk.