How employers can stay compliant with the April 2025 National Minimum Wage changes

In the recent Budget, Chancellor Rachel Reeves revealed an increase to the National Minimum Wage (NMW) from April 2025.

These changes will bring challenges for businesses, especially in industries reliant on younger or lower-paid workers and will require careful planning to avoid legal and financial risks.

New National Minimum Wage rates from April 2025

From April 2025, NMW rates will increase significantly, advancing Labour’s commitment to harmonising wage brackets towards a unified adult rate. The new rates are as follows:

National Living Wage (for workers aged 21 and over): A rise of 6.7 per cent, from £11.45 to £12.21 per hour.

18-20-year-olds: An increase of £1.40, moving from £8.60 to £10.00 per hour.

16-17-year-olds and apprentices: A boost of £1.15, taking the rate from £6.40 to £7.55 per hour.

Accommodation Offset: Raised to £10.66 per day.

For a full-time employee aged 21 or over, this new rate will mean an annual pay increase of roughly £1,400.

Employers need to be ready to incorporate these changes by April to maintain compliance.

Risks of failing to comply with NMW requirements

Employers who do not follow the NMW can face severe penalties, including:

Fines of up to 200 per cent of the underpayment (up to £20,000 per worker).

Public exposure by the Government, with businesses that consistently breach regulations named and shamed.

Employment Tribunal claims from workers seeking back pay or compensation for not receiving the legal minimum wage.

To avoid these repercussions, employers should start planning well ahead of April.

Key steps for ensuring compliance with NMW increases

Update employment contracts

Ensure all contracts reflect the new NMW rates, particularly for part-time, temporary, and young workers.

Contracts should specify the correct hourly rate for each age group.

Revise payroll systems

Payroll systems must be updated to reflect the new rates. This will prevent underpayment and ensure compliance with the April 2025 changes.

Review pay structures

For businesses with tiered pay models, the increase in NMW could narrow pay gaps between entry-level and higher positions.

Consider revising your pay structure to maintain fair differentials, reducing the potential for employee dissatisfaction or equal pay claims.

Brief HR and payroll staff

Make sure payroll and HR personnel are fully aware of the new requirements.

Provide updated materials, such as employee handbooks and onboarding resources, to support their understanding of the changes.

Conduct regular wage audits

Regular audits will help you identify any discrepancies or underpayments, ensuring that all employees are being paid at or above the new NMW rates. Document all audits thoroughly and store them securely.

With the increase in NMW, employees may monitor their pay closely, particularly if they are concerned about compliance.

If you need assistance in implementing these changes, our team is available to help you navigate this transition smoothly. Contact us today.