PAYROLL & EMPLOYER COMPLIANCE
Getting Ready for the National Minimum Wage Increase effective 1 April 2026
The National Minimum Wage (NMW) and National Living Wage (NLW) rates increased on 1 April 2026. As an employer, it is your legal responsibility to ensure every member of staff is paid at least the correct rate and getting it wrong, even by accident, can result in heavy fines, back-pay demands, and public naming by HMRC.
WHAT IS THE NATIONAL MINIMUM WAGE (NMW) AND THE NATIONAL LIVING WAGE (NLW)?
The National Minimum Wage is the minimum hourly rate that almost all workers in the UK are legally entitled to receive. The rate varies depending on a worker’s age and whether they are an apprentice.
The National Living Wage is the highest tier and applies to workers aged 21 and over. Rates are reviewed annually by the Low Pay Commission and increase every April. Same rules apply to both.
Worker Category – Rate Apr 2025 – Rate Apr 2026 – Increase
- Age 21+ (National Living Wage) – £12.21/hr – £12.71/hr – +4.1%
- Age 18–20 – £10.00/hr – £10.85/hr – +8.5%
- Age 16–17 – £7.55/hr – £8.00/hr – +6.0%
- Apprentice Rate – £7.55/hr – £8.00/hr – +6.0%
- Accommodation Offset (daily) – £10.66/day – £11.10/day – +4.1%
YOUR RESPONSIBILITIES AS AN EMPLOYER
· It is your duty as an employer to make sure all staff are being paid the correct minimum wage.
· This includes checking ages and updating rates when a worker moves into a higher age band. Example: Turning 18 and 21 increases their entitlement automatically.
· You must also ensure workers are not effectively being paid below NMW due to deductions or unpaid working time.
UNDERSTANDING THE PAY REFERENCE PERIOD
The pay reference period is the period of time for which a worker is paid. This could be weekly, fortnightly and monthly.
A pay reference period can not be longer than a one month of period. A key indicator that it is the period that payment covers and not when the payment made.
EXAMPLE: If a monthly paid worker is paid on the last day of the month, their pay reference period runs from the 1st to the last day of that month. The NMW check applies to that period alone and not averaged across the year.
HOW DOES THIS AFFECT EMPLOYERS IN PRACTICE?
EXAMPLE: If your workers pay reference period is 25th Month to the 24th Month, for NMW purposes workers hourly rate should be increased from 25th April. Key information is that the rate does not immediately rise on 1st April 2026 and it starts on next pay reference period after 1st April 2026.
COMMON ERRORS — APPRENTICE RATES
The lower apprentice rate of £8.00/hr (from April 2026) only applies in two situations:
- the apprentice is in the first year of their apprenticeship
- Or they are aged 19 or under.
In all other cases, the apprentice is entitled to the NMW for their actual age.
⚠️ Watch out: An apprentice aged 21 who has completed their first year must be paid the full National Living Wage of £12.71/hr and not the apprentice rate. Many employers overlook this, especially when apprenticeships span multiple years.
COMMON ERRORS — UNPAID WORKING TIME
All time a worker spends working or required to be available for work must be included in NMW calculations. Employers often inadvertently underpay by failing to count:
- Mandatory training time (including induction, online training and any associated travelling)
- Time spent travelling between work assignments (not the home commute)
- Waiting or on call time at the workplace
- Time spent putting on or taking off a required uniform on the premises (consistent with HMRC general approach)
Common Errors — Deductions and Benefits in Kind
Certain deductions from wages can reduce a worker’s effective pay below the NMW which is unlawful, even if the worker agreed in their contract. Common problem areas include:
- Charging workers for uniforms or personal protective equipment
- Deducting for tools or equipment required for the job
- Till shortfall deductions in retail or hospitality (unless it is due to misconduct)
- Meal and transport to work arranged and charged by the employer
- Purchases of good and services from the employer, even if the worker freely chooses to make the purchases
ENFORCEMENT — WHAT HMRC CAN DO
HMRC enforces NMW compliance and from April 2026 the new Fair Work Agency (FWA) will consolidate enforcement of NMW, holiday pay, and statutory sick pay under one roof.
- Notice of underpayment will be issued to the employer
- HMRC can demand arrears at the current NMW rate not the historic rate at the time of the breach
- Financial penalties of up to 200% of the underpayment per worker
- Businesses can be publicly named by the Department for Business and Trade.
- Arrears payments may also attract employer NIC and pension contributions
What to Do if an Underpayment Occurs
If you identify an underpayment, act quickly.
- Arrears must be repaid at the current NMW rate at the time of repayment and not the historic rate. This can make old mistakes significantly more costly.
- You need to make a voluntary declaration to HMRC. No financial penalty and public naming as a result of voluntary declaration.
- If HMRC has issued a notice, seek professional advice immediately and do not ignore correspondence.
Summary — Your April 2026 Action Plan
- Confirm all employees pay rates are at or above the correct NMW/NLW rate from 1 April 2026
- Update payroll software to automate age-triggered rate changes
- Review working time records are all payable hours being captured?
- Check apprentice rates and confirm correct rate based on age and year of apprenticeship
- Review any wage deductions to ensure none bring effective pay below NMW
- Recalculate employer NIC and pension costs at new wage levels and update your budget
- Broaden your pay review to address pay compression across your wider team
- Keep clear, written payroll records and do your best protection in any HMRC review
Need support with payroll compliance? Our qualified team can conduct a payroll audit, help you implement the April 2026 changes correctly, and ensure your business is protected. Contact us today for a confidential conversation.