The 2026/27 NMW rates
The National Minimum Wage rates that apply from April 2026 are: the National Living Wage for workers aged 21 and over is £12.21 per hour; the rate for workers aged 18 to 20 is £10.00 per hour; the rate for workers under 18 (who are above compulsory school age) is £7.55 per hour; and the apprentice rate is £7.55 per hour. The apprentice rate applies to apprentices aged under 19, or to those aged 19 and over who are in the first year of their apprenticeship.
Note that these are the statutory minimum rates — employers are free to pay more, and many do. The Real Living Wage, calculated independently by the Living Wage Foundation, is higher than the NLW and is voluntarily adopted by accredited employers. For payroll planning, use the statutory NMW rates as the floor and consider whether your sector and location benchmarks require you to pay above the minimum to attract and retain staff.
The rates increase each April. For multi-year headcount planning, build in an assumption for NMW increases rather than holding rates fixed. Over the past five years, the NLW has increased by roughly 8–10% per year on average. A workforce predominantly on NMW therefore faces compounding payroll cost increases — both the higher wage and the higher employer NI that follows from a larger NIable salary.
How NMW is checked against pay
HMRC enforces NMW compliance through an averaging calculation. Pay is totalled for a reference period (normally the pay period), then divided by the hours worked in that period. The resulting hourly rate must equal or exceed the relevant NMW rate for the worker's age. This sounds simple but the detail is where errors occur.
What counts as pay for NMW purposes is defined carefully in the regulations. Regular basic pay counts, as do most bonuses, incentive payments and tips paid through the payroll. What does not count includes employer pension contributions, benefits-in-kind, expenses, and — critically — salary sacrifice amounts. If an employee on NMW participates in a salary sacrifice pension scheme, the reduction in gross cash pay can push their effective hourly rate below NMW. HMRC has issued specific guidance on this: salary sacrifice cannot take workers below NMW, so employers must top up the cash wage to the NMW floor before applying the sacrifice.
Unpaid work time is another common compliance failure. If a worker is required to attend training, wait for equipment, travel between sites, or complete unpaid administrative tasks, that time counts as working time for NMW purposes even if it is not treated as paid hours. HMRC enforcement notices regularly cite unpaid travel time and mandatory unpaid training as violations. For any role where workers perform activity outside core contracted hours, review whether that activity is being counted and paid correctly.
Employer NI cost at NMW levels
At the NLW of £12.21 per hour for a full-time 37.5-hour week, annual salary is approximately £23,810. Employer NI on that salary is approximately £2,822 per year (15% of £23,810 minus £5,000 = £18,810). Minimum pension on qualifying earnings of £17,570 (£23,810 minus £6,240) is approximately £527 per year. Total employer cost: approximately £27,159 before overheads.
At the 18–20 rate of £10.00 per hour, full-time annual salary is approximately £19,500. Employer NI: 15% of £14,500 = £2,175 per year. Pension: 3% of £13,260 = approximately £398 per year. Total employer cost: approximately £22,073. At the under-18 and apprentice rate of £7.55 per hour, full-time annual salary is approximately £14,723. Employer NI: 15% of £9,723 = approximately £1,458 per year. Pension: 3% of £8,483 = approximately £255 per year. Total employer cost: approximately £16,436.
These figures use full-time hours (37.5 per week, 52 weeks). For part-time workers, the same NMW rate applies per hour but annual salary and therefore NI and pension costs are lower in proportion to hours. The NI secondary threshold (£5,000) and the pension lower earnings limit (£6,240) are annual figures that do not reduce for part-time hours — so part-time workers generate proportionally more NI and pension overhead per pound of wage cost than full-time staff.
Common compliance mistakes
The accommodation offset is a legal deduction that employers can apply where they provide accommodation to employees — up to a set daily rate per day of accommodation provided. The offset for 2026/27 is £10.66 per day. Employers sometimes apply this offset incorrectly: calculating it at a higher rate than permitted, applying it to workers for whom accommodation is not provided, or failing to ensure that after the offset the worker's pay still meets NMW. HMRC treats incorrect accommodation offset as non-payment of NMW.
Deductions for uniforms, equipment, or tools can also push workers below NMW where those items are required for the job. Deductions for the employer's benefit that reduce take-home pay below NMW are not permitted. Some employers handle this by requiring uniforms but absorbing the cost themselves rather than deducting it. If your contracts or HR policies include deductions for workplace requirements, review whether those deductions could create NMW compliance risk.
HMRC publishes a quarterly naming scheme for employers found to have underpaid NMW. Appearing on that list creates reputational damage that is disproportionate to the financial penalty in many cases, particularly for consumer-facing businesses where employment practices affect customer perception. The most effective protection is a regular NMW audit — checking that pay records, hours, deductions and overtime arrangements produce a compliant hourly rate for every worker in every pay period.