Are You Paying the Right Wage in 2025? Why Employers Must Act Now on Minimum Wage Compliance
Back in April, millions of UK workers received a pay rise as new rates for the National Minimum Wage (NMW) and National Living Wage (NLW) came into force. But over six months on, we’re still seeing employers being caught out — and the consequences are not only costly, but increasingly common.
With HMRC ramping up investigations into wage compliance, now is the time for business owners to check their payrolls and ensure they’re meeting legal obligations. If you haven’t already reviewed your rates, the risks of delay are significant — from reputational damage to large financial penalties.
National Living Wage: What Changed in April 2025?
Since 1st April 2025, the National Living Wage has applied to all workers aged 21 and over (previously 23+).
The rate increased from £11.44 to £12.21 per hour — a 6.7% rise. For a full-time employee, that’s worth approximately £1,400 extra per year.
If you’ve not yet updated pay rates for eligible team members, this should be an urgent priority.
National Minimum Wage: Significant Increases for Younger Workers
Employees under 21 are entitled to the National Minimum Wage, and the April 2025 increases were some of the largest we’ve seen:
- Ages 18–20: up from £8.60 to £10.00 (a 16.3% increase) — worth around £2,500 more annually
- Ages 16–17: up from £6.40 to £7.55 (an 18% rise)
Apprentice Rates: Are You Paying the Right Amount?
Apprentices aged 16–18, or 19-year-olds in the first year of their apprenticeship, are entitled to £7.55 per hour.
Once they move beyond their first year — or if they are aged 19+ — they should be paid the full National Minimum or Living Wage appropriate to their age. Errors in this area are common, so if you employ apprentices, now’s a good time to double-check.
Who Doesn’t Qualify?
It’s important to understand that not all workers are entitled to minimum wage. Exemptions include:
- The self-employed
- Company directors without employment contracts
- Volunteers
- Armed forces personnel
- Prisoners
- Some participants in government work schemes
But for everyone else, minimum pay must be applied — even if they’re not paid by the hour.
The Consequences of Underpayment
Failing to pay eligible employees the correct rate is a criminal offence — and HMRC is actively enforcing the law.
In a crackdown last year, more than 200 employers were named and shamed, fined a total of £7 million, and ordered to reimburse 63,000 workers.
Major household names were among those caught out, including:
- WH Smith: underpaid more than 17,600 workers, owing over £1 million
- Marks & Spencer, Argos, and Lloyds Pharmacy also featured on the list
This highlights that no business is too big — or too small — to escape scrutiny.
Real Living Wage: A Voluntary Higher Standard
Separate from the statutory NMW/NLW, the Real Living Wage is set by the Living Wage Foundation and adopted voluntarily by over 16,000 UK employers.
- £13.85 per hour in London (up 70p)
- £12.60 per hour across the rest of the UK (up 60p)
While not a legal requirement, the Real Living Wage offers a benchmark for businesses who want to go above and beyond — and may help with recruitment and retention in a tight labour market.
Now Is the Time to Review Your Payroll
At IN Accountancy, we’re seeing a clear rise in wage compliance activity from HMRC — particularly in sectors employing younger staff, apprentices, or part-time workers.
We recommend all employers:
- Review pay rates and employee classifications
- Check whether changes from April 2025 have been correctly applied
- Consider whether voluntary Living Wage adoption may be suitable
- Prepare for HMRC spot checks, even if you’ve never been contacted before
Need help checking your wage compliance? Get in touch — before HMRC checks for you.
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