What employers need to know about the National Living and Minimum Wage

Employees must be paid the National Living Wage (NLW) or National Minimum Wage (NMW) rate for their age for all time spent working. If you are an employer and the newly created Fair Work Agency discovers you have paid your employees less than the NLW or NMW it can issue you a notice to:

• pay the correct wage to the employee and
• issue a penalty of up to £20,000 and a minimum of £100 for each worker affected.

Therefore, it is very important that all employers are aware of these rules.

What are the rates for the NLW and NMW?

As announced in the Autumn Budget 2025, from 1st April 2026, the NLW rate increased to £12.71 for employees over the age of 21 years and and the NMW rates increased to £10.85 and £8 per hour respectively. 

The new rates are: 

	Rate from April 2025	New Rate from April 2026	Increase
NLW	£12.21	£12.71	4.1%
NMW 18-20 year old rate	£10.00	£10.85	8.5%
NMW 16-17 year old rate	£7.55	£8.00	6%
Apprentice rate	£7.55	£8.00	6%

It is important to check employees are being paid correctly based on their actual working time and that you, as an employer, understand what does and doesn’t count towards working time for NLW and NMW purposes. At first glance this may seem easy to calculate, but there are some special considerations which may need to be taken into account. 

Employees will need to be paid at least NLW and NMW for all hours of working time in each pay period. For employees who are paid a salary, they are contracted to work a certain number of hours in a year.

What counts as working time?  

Working time is defined as not only the time employees are working but also time they are required to be available to work. 

This can include: 

• time employees are required to be available to work but unable to perform their duties such as when machinery or computers necessary to work are broken.  
• time an employee is ‘on call’ outside of their home, then they are required to be available to work, even though there may not be any work for them to complete. 

In the above situations the employee would need to be paid NLW or NMW for those hours of being available to work. 

Time spent on mandatory training by employees also counts as working time, including training necessary to commence working with the employer. 

What doesn’t count as working time? 

Time spent away from work does not count as working time, even if they are paid for it. This includes: 

• lunch or rest breaks 
• sickness 
• holiday  
• parental leave  

Special considerations: 

Sleeping: 

There are some employees who may be permitted to sleep for some or all their shift, often in the care sector. In 2021, the Supreme Court ruled that employees are eligible for minimum wage when they are ‘awake for the purposes of working’. For example, a carer may be allowed to sleep during their shift but must wake to take phone calls or deal with an emergency. They would need to be paid NLW or NMW for the hours they are ‘awake for the purpose of working’ only. However, employers must provide suitable sleeping facilities for the employees, and if not provided then NLW or NMW must be paid for the entire shift. 

Travel time: 

Regular commute time between an employee’s home and regular place of work does not count toward working hours for NLW or NMW purposes. Travelling for business purposes, including time spent waiting for transportation, would be considered working time for NLW or NMW purposes. 

Ensuring you pay your employees correctly is an important employer obligation. The new Fair Work Agency will be increasing scrutiny towards NLW and NMW compliance and the cost of making errors can be significant. As well as penalties, an employer’s reputation can also be hit when a mistake is made as the Fair Work Agency aims to continue HMRC’s policy of ‘naming and shaming’ employers who fail to pay NLW or NMW. 

Need help with your payroll?

If you would like any advice or assistance with payroll or other employer obligations, please contact TaxAssist Accountants on 01756 541005 or use our simple online contact form to arrange a free initial consultation.  

 

Last updated 10 Apr 2026 | First published 17 Apr 2025

Share

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

---