National Minimum Wage: What Employers Need to Know for 2026–27
Each April, the National Minimum Wage (NMW) rates increase, but complying with the new figures involves far more than simply adjusting an hourly rate. Employers must consider working
hours, deductions, bonuses, accommodation, and pay reference periods to ensure full compliance.
Below is an overview of the key points employers should understand for the 2026–27 National Minimum Wage year.
National Minimum Wage Rates 2026–27
From April 2026, the following hourly rates apply:
Age 21 and over (National Living Wage): £12.71
Aged 18–20: £10.85
Under 18 (above compulsory school leaving age): £8.00
Apprentice rate: £8.00
Important note on apprentices:
The apprentice rate applies to:
Apprentices under the age of 19, or
Apprentices aged 19 and over in the first year of their apprenticeship.
After this point, standard age-related rates apply.
Salaried Workers and Minimum Wage Compliance
While much of the focus is often on hourly-paid staff, salaried workers must also be paid at or above the appropriate minimum wage. Employers should review salaried roles to ensure pay does not fall below the required level when assessed against actual hours worked.
Example:
A salaried employee aged 42, working 37 hours per week, must earn at least:
37 hours × 52 weeks × £12.71 = £24,455 per year
It is essential to consider actual hours worked, not just contracted hours. Caution is required where bonuses are linked to completing specific tasks, as the bonus must effectively compensate for any additional time worked.
What Counts as Pay for National Minimum Wage?
Calculating the National Minimum Wage can be straightforward where pay consists solely of basic wages. However, complexity increases where additional payments or deductions are involved.
Generally:
Commission payments and bonuses can usually count towards NMW
Overtime premiums often do not count towards NMW
A practical approach is to start with pay that is subject to National Insurance contributions, then work backwards to identify any exclusions.
Deductions and Salary Sacrifice
All deductions must be carefully reviewed as part of an NMW calculation.
Salary sacrifice arrangements reduce pay for NMW purposes, as they lower pay subject to National Insurance
Certain deductions, including those for staff purchases, may unintentionally reduce pay below the minimum wage
Historically, staff purchases were sometimes processed through payroll as net deductions, but
this approach is now widely avoided due to the risk of noncompliance.
Given the complexity of deductions, professional advice is recommended where arrangements go beyond standard payroll processing.
Living Accommodation
Living accommodation is the only benefit in kind that can be taken into account when calculating National Minimum Wage.
However, the calculation is not straightforward. The government publishes specific accommodation offset rates, which must be applied correctly to avoid underpayment.
Employers providing accommodation should take care to ensure calculations are accurate and up to date.
When Do National Minimum Wage Rates Increase?
National Minimum Wage rates increase:
From 1 April, or
When a worker becomes entitled to a higher rate due to age or status.
However, the change formally applies from the first full pay reference period after the increase.
Examples:
If rates change in April, a monthlypaid employee would normally see the increase reflected in their April pay
If a monthly pay period runs from 16 March to 15 April, the increase would not apply until the May payroll.
For simplicity and clarity, many employers choose to use the calendar month as the pay reference period for monthly-paid staff.
There is no requirement to split a pay reference period across different rates. For example, a Four-weekly pay period that spans 1 April can be paid entirely at the old rate, the new rate is not required until the pay reference period starting after 1 st April.
Final Thoughts
National Minimum Wage compliance is about more than headline rates. Employers must consider pay structures, deductions, benefits, and working patterns to ensure all workers receive at least the legal minimum.
Taking the time to review arrangements each April can help prevent costly errors and ensure continued compliance.
Additional resources