UK minimum wage 2025: Rates and responsibilities

1. What is minimum wage?
2. Is the National Minimum Wage the same as the National Living Wage?
3. Who is entitled to the minimum wage?
4. What is the National Minimum Wage in 2025 in the UK?
5. How does the minimum wage in 2025 compare to other UK salaries?
6. What are your legal obligations as an employer?
7. When does a new minimum wage come into effect? 
8. Manage your payroll effectively with PeopleHR

The UK minimum wage is the legal minimum amount an employer must pay per hour of work. It’s expressed as an hourly rate, though it can be worked out weekly or monthly depending on how an employee is paid. This ensures clarity and fairness across industries, regardless of job type or working hours.

The minimum wage is reviewed and updated annually by the government to make sure wages reflect inflation, living costs, and broader economic factors. The increase is part of this cycle, helping workers to keep pace with rising household expenses while gradually reducing the gap between the lowest earners and the average UK wage.

While the two terms sound very similar, the minimum wage applies to workers under 21, while the National Living Wage covers employees aged 21 and over.

The strategy for the minimum wage in the UK in2025 has been to gradually close the gap between the two rates. By increasing the lower age bands at a faster pace, the aim is to bring younger workers’ pay closer to the median UK wage and narrow inequalities across the workforce. This makes the system more equitable and provides a stronger incentive for younger people to enter and remain in work.

Almost all workers in the UK are entitled to receive at least the minimum wage in 2025. This includes part-time staff, agency workers, and those on zero-hour contracts. The approach ensures consistency across the workforce and helps to prevent exploitation of vulnerable groups such as casual or agency staff. Ensuring that staff receive the correct wage is a legal obligation, not a matter of choice.

However, there are some exceptions. For example, the self-employed, volunteers, and company directors without employment contracts do not qualify. You can find full details on who gets the minimum wage on the government’s website. Employers need to be aware of these exceptions to avoid errors in payroll and compliance.

The new minimum wage 2025 is a significant rise, especially for younger workers. The 16–20 age brackets and apprentices are receiving some of the largest percentage increases in years. From April 2025, the following pay rates apply across the UK:

If you’re aged 21 or over and working 35 hours a week on the new rate, your annual salary will be at least £22,222. While this is a step forward in terms of reducing in-work poverty and improving pay security, it’s still well below the current average salary in the UK, which sits at £31,602. Full-time employees typically earn more than part-time staff, further widening the gap between minimum and average pay.

The real living wage, calculated by the Living Wage Foundation, is higher than the government’s statutory rate. Many employers choose to become accredited as a Living Wage Employer, voluntarily paying staff more than the minimum legal requirement. This helps with recruitment, retention and reputation, and can also boost employee morale by showing a genuine commitment to fair treatment and financial wellbeing.

For businesses that can’t afford to pay more than the minimum, offering strong employee benefits such as flexible working, training opportunities, or enhanced holiday allowances can help to offset lower pay and improve staff satisfaction.

As an employer, it’s your responsibility to make sure every worker receives the correct wage. Failing to comply not only risks financial penalties but also reputational damage. There are several key obligations you need to follow.

Paying at least the minimum wage

Paying all eligible employees at least the minimum wage is the most basic requirement for employers. This includes checking that staff move to the correct pay band as they age. While it’s optional to offer more, you cannot legally pay eligible workers less than the government mandated rates.

Following all relevant legislation

Payroll compliance extends beyond just paying the correct wage. Employers also need to make sure they’re acting in line with legislation including:

• Employment Rights Act 1996
• National Minimum Wage Act 1998
• National Minimum Wage Regulations 2015
• National Minimum Wage (Amendment) Regulations 2025.

HMRC is responsible for enforcing the minimum wage laws. After conducting an investigation, they can issue penalties to employers who fail to comply with the above legislation.

Keeping accurate records

Employers must maintain clear payroll records for at least six years. This includes evidence of hours worked and pay received. If HMRC audits your business, these records will be reviewed to ensure compliance.

Providing written contracts and payslips

Every employee should receive a written contract and detailed payslip. Payslips must show deductions, hours worked, and total pay. Interactive payslips can be a useful tool to simplify this process and reduce errors, making it easier for employees to understand exactly what they’re being paid.

Monitoring pay deductions

Employers cannot legally make deductions that bring an employee’s pay below the minimum wage, except in the case of statutory payroll deductions like tax and National Insurance. Other lawful deductions can apply, such as agreed pension contributions or trade union fees, but these must be transparent and documented. It’s also important to note that costs for uniforms, training or other work-related expenses cannot reduce pay below the minimum threshold.

New minimum wage rates take effect on a national scale from April each year, but there are other occasions when employees may be entitled to a pay increase. Employers need to stay alert to these changes to ensure compliance.

Start of the financial year

This begins on 1 April each year, in line with the start of the UK financial year. This ensures that pay rates remain aligned with inflation and wider economic changes. Employers should prepare their payroll systems well in advance of this date to avoid any problems.

When an employee’s age increases

If an employee moves into a higher age band, such as turning 18 or 21, they become entitled to the new rate from their next pay period. This could take effect at different times depending on whether they’re paid weekly, monthly or on another payroll schedule. While the government has suggested that it may phase out these age bands in future to avoid discrimination, they currently remain in place, so employee records must be kept up to date to make sure they’re receiving the correct rate of pay.

The wage increase marked a big change for businesses across the UK. With the government pushing up rates for younger workers and apprentices, employers must pay close attention to compliance now more than ever. Keeping up with this wage, monitoring employee entitlements, and ensuring accurate records are all essential parts of running a responsible workplace.

PeopleHR’s payroll software helps to simplify compliance, automate calculations, and avoid costly mistakes following important changes to employment legislation. With tools to manage payslips, track employee data and stay aligned with regulations, you can run your business with confidence.

Watch a demo today or get in touch with us to learn more about how we can help your business to stay compliant with the latest wage laws.

If you enjoyed this article, you may be interested in reading:

• Salary benchmarking: How do you compare?
• A Guide to Overtime Pay Rates in the UK
• Statutory payroll deductions: The 4 mandatory examples