NMW Increase 2025

In the Autumn Budget 2024, the Government has confirmed that as of April 2025, there will be changes to the National Minimum Wage (“NNW”) and National Living Wage (“NLW”).

The NMW is available to those at school leaving age and from 1 April 2025 we will see:

• A 16.3% increase in NMW for the 18-20 bracket rising from £8.60 to £10.00 per hour;
• A 18% increase in NMW for the 16-17 and apprentices rising from £6.40 to £7.55 per hour.

The NLW entitles workers aged 21 and over to a current rate of £11.44 per hour. This will increase by 6.7% to £12.21 per hour.

The increase in the NMW and NLW is stated to be an attempt by the Government to support low-paid workers with the struggles with the increasing living costs. This is the largest increase for under 21s on record, and is the first step towards a single rate for all adults.

The penalties for non-compliance are severe and can include repayment of all underpayments going back six years and a fine of 200% of the underpayment. The government will also “name and shame” companies – Argos, Lloyds Pharmacy, WHS and M & S are amongst some high-profile names that have all received this treatment in the past.

The increases may also inadvertently create workforce tension when employers, unable to afford generous wage increases across the board, apply smaller increases for those earning slightly above the National Minimum Wage (NMW). This has been termed ‘pay compression’ Employers in this situation may have to give thought to how they can continue to incentivise this group of workers where there is no further room for pay increases.

One issue with next April’s significant increases is that employers may be forced to consider how the costs can be absorbed. This may involve having to consider ways in which they can reduce their overall wage bill such as reviewing commission and bonus schemes, benefits arrangements, reducing hours of work or even reorganising the workforce. Clearly, each of these will have consequences, the impact of which will need to be carefully thought through. If employers do proceed with any of these actions, they will need to consider their legal obligations including consulting with impacted employees and seeking agreement to the changes where required.

Please contact our employment team if you require advice on issue relating to this subject.