UK National Minimum Wage employer guide: 2026/27
UK National Minimum Wage (2026/27): Employer Guide + Penalty Rules
Comprehensive UK NMW + NLW guide for 2026/27. Four hourly rates effective 1 April 2026: National Living Wage £12.71/hr (21+), £10.85/hr (18-20), £8.00/hr (16-17), £8.00/hr (apprentice). Accommodation offset £11.93/day. Salary-sacrifice-meets-NMW trap. Penalty regime 200% of underpayment × cap £20,000/worker. Naming-and-shaming policy. 4 worker-type scenarios with compliance check. Statute: National Minimum Wage Act 1998 + NMW Regulations 2015.
2026/27 hourly rates (from 1 April 2026)
| Category | Hourly rate | Up from 2025/26 | Notes |
|---|---|---|---|
| National Living Wage (21+) | £12.71 | £12.21 | Annual full-time ~£24,785 |
| 18-20 rate | £10.85 | £10.00 | Annual full-time ~£21,158 |
| 16-17 rate | £8.00 | £7.55 | Annual ~£15,600 at 37.5hrs |
| Apprentice rate | £8.00 | £7.55 | Under 19, or 19+ in 1st year of apprenticeship |
Set by Low Pay Commission recommendation, accepted by government. April 2024: NLW age boundary lowered from 23 to 21, bringing many more young workers into the higher rate. The NLW gap above CPI inflation has averaged 4-6pp/year since 2016, reflecting the political commitment to a "real living wage" target of two-thirds of median earnings.
4 worker-type compliance scenarios
| Worker scenario | Effective hourly | NMW for age | Compliant? | If not, annual shortfall + max penalty |
|---|---|---|---|---|
| Adult full-time NLW worker Age 25, 37.5hrs/wk, £476.63/wk Standard 37.5 hr week at £12.71. Annual £24,785. | £12.71 | £12.71 | YES | — |
| 19yo at 18-20 rate Age 19, 40hrs/wk, £434/wk £10.85 × 40hrs = £434/wk. Falls just at NMW. | £10.85 | £10.85 | YES | — |
| Salary sacrifice into pension Age 30, 37.5hrs/wk, £600/wk £600 gross - £100 pension sacrifice = £500/wk taken home. £500/37.5 = £13.33/hr ≥ NMW. Compliant. | £13.33 | £12.71 | YES | — |
| Live-in care worker with accommodation offset Age 35, 40hrs/wk, £508.4/wk £12.71 × 40 = £508.40. Employer providing accommodation may offset up to £11.93/day. If charging more than offset, the excess reduces hourly NMW calculation. | £12.71 | £12.71 | NO | Shortfall £0, penalty up to £0 |
Penalty regime - £20k per worker max
Section 19A National Minimum Wage Act 1998 (as amended) sets a TWO-PART penalty:
- HMRC Notice of Underpayment: employer must pay arrears at the CURRENT NMW rate (not historical) - so arrears are effectively uprated.
- Civil penalty: 200% of the underpayment, capped at £20,000 per worker. Reduced 50% if paid within 14 days of notice.
- Naming and Shaming: BIS / Department for Business publishes the company name + underpayment amount publicly. 3,200+ businesses named since 2014 scheme started.
- Criminal prosecution (Section 31 NMW Act): rare but possible for deliberate / persistent breach. Conviction unlimited fine + director liability.
Voluntary self-correction (employer identifies + pays arrears + notifies HMRC) avoids the 200% penalty under the "Self-Correction" guidance, but does NOT avoid the naming-and-shaming list publication once identified. Common employer error: assuming the £20k cap means at most £20k cost - WRONG. The cap is per worker; a 50-worker breach can hit £1m total penalty + arrears + reputation damage.
What pay counts toward NMW
Includes (counts toward NMW)
- Basic pay (gross, before tax)
- Performance bonuses
- Incentive payments (e.g. sales targets)
- Shift premiums where part of basic remuneration
- Accommodation offset £11.93/day (if employer provides accommodation)
Excludes (does NOT count)
- Tips, gratuities, service charges (Regulation 10 NMW Regs)
- Unsocial-hours premiums (Regulation 39)
- Overtime PREMIUM portion (not basic-rate of OT)
- Expenses reimbursement
- Benefits in kind (except accommodation offset)
- Tronc / tipping payments via troncmaster
Frequently asked questions
What is the National Minimum Wage and National Living Wage for 2026/27?
Four hourly rates effective from 1 April 2026: National Living Wage (NLW) £12.71/hour for workers aged 21 and over (up from £12.21 in 2025/26). 18-20 rate £10.85/hour (up from £10.00). 16-17 rate £8.00/hour (up from £7.55). Apprentice rate £8.00/hour for apprentices under 19 OR aged 19+ in the first year of their apprenticeship (matches the 16-17 rate from April 2025). All rates uprated annually by the Low Pay Commission's recommendation, accepted by the government. Statute: National Minimum Wage Act 1998 + National Minimum Wage Regulations 2015. The age 21 boundary for NLW was lowered from 25 to 23 in 2021 then to 21 in 2024 - covering many more young workers at the higher rate.
What is the accommodation offset?
When an employer provides accommodation to a worker, the employer can OFFSET part of the accommodation value against NMW calculations. 2026/27 daily offset cap: £11.93/day, £83.51/week. Means: if employer charges £100/week for accommodation, only £83.51 of that is permitted as a "wage reduction" for NMW calculation; the £16.49 excess is treated as further reducing the worker's hourly pay (potentially breaching NMW). Common in: hospitality (live-in pub staff, hotel workers), agriculture (seasonal workers), live-in care workers, domestic service. Free accommodation (no charge to worker): employer can ADD £11.93/day to the worker's notional pay for NMW calculation purposes. Worked example: live-in carer paid £400/week + free accommodation. NMW-effective pay = £400 + 7 × £11.93 = £483.51. Divided by 40 hours = £12.09/hour - above NMW.
How does salary sacrifice interact with NMW?
You cannot salary-sacrifice BELOW the NMW (Regulation 11 NMW Regulations 2015). The worker's POST-SACRIFICE pay must exceed NMW × hours worked. Practical implication: a £24,785 NLW worker (£12.71 × 37.5 × 52) has ZERO headroom for salary sacrifice - any sacrifice would breach NMW. A £30,000 worker has £30,000 - £24,785 = £5,215 of annual sacrifice headroom. Worked example: £30k worker wants to sacrifice £4k into pension. £30k - £4k = £26k post-sacrifice salary, divided by 1,950 hours/year (37.5 × 52) = £13.33/hour. Above £12.71 NMW = COMPLIANT. Same worker wanting £6k sacrifice: £24k post-sacrifice / 1,950 = £12.31/hour. Below NMW = NOT COMPLIANT. The employer's NMW reference period (typically monthly pay reference period) is what's tested - so a one-month large sacrifice that drops to
What is the penalty if I underpay NMW?
Two penalty mechanisms. (1) HMRC notice of underpayment: HMRC orders the employer to pay arrears AT THE CURRENT NMW RATE (not the historical rate at time of underpayment - so arrears are uprated). (2) Civil penalty: 200% of the underpayment amount, capped at £20,000 per worker. Section 19A NMW Act 1998 (as amended). Penalty applies in addition to the back-pay order. So underpaying a single worker by £5,000 over a year: HMRC orders £5k arrears + 200% penalty £10k = £15k total cost. Multiple workers across the business: penalty per worker. (3) Naming and Shaming: BIS / Department for Business publishes the company name + underpayment amount publicly. Companies named since 2014 scheme started: 3,200+ businesses. Sectors most affected: hospitality, retail, social care, hairdressing, beauty, agriculture. The reputational damage often exceeds the financial penalty for B2B-facing firms. Criminal prosecution: rare but possible for deliberate / persistent breach (Section 31 NMW Act).
What pay counts toward NMW?
INCLUDES (under Regulations 9-12 NMW Regs 2015): basic pay, performance bonuses, "incentive" payments (e.g. for hitting sales targets - but not gratuities), shift premiums (where part of basic remuneration). EXCLUDES: tips and service charges (separate Tronc / tipping legislation), unsocial hours premiums (Section 39 NMW Regs - explicitly NOT counted), overtime premium (the premium portion, not basic-rate portion of OT), expenses reimbursement, benefits in kind (apart from accommodation offset), tronc/tipping payments. Common error: employers count tips toward NMW. WRONG. Tips are explicitly excluded under Regulation 10 NMW Regs since 2009. Worker's basic NMW must be met WITHOUT considering tip income. Many hospitality businesses got this wrong pre-2015. Deductions that reduce NMW pay: any deduction made for "the employer's own use and benefit" (e.g. mandatory uniforms, training course costs, till shortages) reduces the worker's NMW pay even if technically allowed by contract. Regulation 14 NMW Regs.
How is NMW calculated for salaried workers?
Salaried workers - those paid a fixed annual salary for set hours - calculate NMW using "annual hours" (Regulation 22 NMW Regs 2015). Annual salary ÷ basic hours worked per year = hourly NMW comparator. Worked example: £24,000 salary, contracted 37.5 hrs/week × 52 weeks = 1,950 hours. £24,000 / 1,950 = £12.31/hour. Below NMW £12.71 = NOT COMPLIANT. Employer must either: (a) increase salary; (b) reduce contracted hours; (c) face arrears + penalty. Treatment of paid leave varies. The "annual hours" approach catches employers who load salaried workers with excessive hours - common in junior professional services, legal, and accounting roles. For salaried workers who do significant unpaid overtime, the NMW calculation can show breach even though base salary appears comfortably above NMW. Output-based or piece-rate workers have their own calculation under Regulations 23-26 - "fair piece rates" methodology.
What about apprentices?
Apprentices have a special £8.00/hour rate (matches the 16-17 rate from April 2025 - previously was its own lower rate). Applies to: apprentices under 19; OR aged 19+ in the FIRST YEAR of their apprenticeship. After 12 months of apprenticeship AND age 19+: full age-band NMW applies (£10.85 if aged 18-20, £12.71 if 21+). Most common error: paying apprentice rate beyond the 12-month first-year period for an over-19 worker. Apprenticeship Standards (new framework) include time spent in classroom training + on-the-job - all counted toward minimum wage hours. Apprenticeship Levy (separate scheme from NMW) - applies to employers with pay bill above £3m, 0.5% levy used for apprenticeship funding. NOT a wage cost on the worker; an employer-only tax.
How long do I have to keep NMW records?
6 years minimum under Regulation 59 NMW Regs 2015 (extended from 3 years in 2020). Records required: hours worked (or contracted hours for salaried), pay received per period, age confirmation, accommodation offset calculations if relevant. HMRC's NMW Compliance Team can request records for any worker in the last 6 years. Penalty for failure to keep records: up to £15,000 per case (Section 31(7) NMW Act). Standard format: timesheets (electronic preferred), payslips showing hourly equivalent, contract showing hours. From 2024 the HMRC compliance team conducted 4,000+ NMW investigations annually. Sectors most targeted: hospitality (47% of cases), retail (18%), social care (12%), hairdressing/beauty (7%), agriculture (5%). The HMRC algorithmic flagging system identifies businesses with: high turnover relative to wage bill, complaints/whistleblower reports, sector-based audits. Voluntary self-correction (pay arrears + notify HMRC) avoids the 200% penalty but doesn't avoid naming-and-shaming.
What about tronc and service charges?
Tips, gratuities, service charges are EXCLUDED from NMW calculation - cannot count toward the worker's minimum wage (Regulation 10 NMW Regs 2015). Separately, the Employment (Allocation of Tips) Act 2023 (effective October 2024) requires employers to pass 100% of tips to workers (with limited deductions for tronc admin costs only). Cannot retain tips for the business. Tronc schemes (pooled tip distribution among staff) remain legal but must distribute fairly. NIC treatment: tips paid via tronc (with an independent troncmaster) are subject to Income Tax via PAYE but NOT subject to NI. Tips paid directly by customer to worker: Income Tax due via SA / PAYE; no NI. Tips charged to credit card / customer bill: subject to Income Tax + NI when paid to worker (treated as wages). The 2023 Tips Act + 2024 commencement is the biggest legal change in UK tipping for decades - mainly affects hospitality + hairdressing. See our tronc + tips tax guide.
Can workers claim arrears for past underpayment?
Yes - up to 6 years of back-claim under the Employment Rights Act 1996 / Limitation Act 1980. Two routes: (1) Direct complaint to HMRC NMW Compliance Team (free, but slow - 6-12 month typical investigation). HMRC orders employer to pay arrears at current NMW rate + applies the 200% penalty. (2) Employment Tribunal claim for "unlawful deduction from wages" under Section 13 ERA 1996. Must be filed within 3 months of the last underpayment (continuous chain rule). Tribunal can award compensation + interest + costs. Workers can use BOTH routes simultaneously. HMRC route doesn't preclude Tribunal; Tribunal doesn't preclude HMRC. HMRC route is more common for sector-wide / multi-worker cases; Tribunal is faster for individual claims. ACAS Early Conciliation required before Tribunal filing (Section 18A Tribunals Act 1996) - free 6-week mediation period. NMW arrears are NOT subject to tax to the worker (they're effectively retrospective minimum-wage compliance), though the arrears amount paid is itself taxable in the year of receipt.
How does NMW work for piece-rate workers?
Section 36 + Regulations 23-26 NMW Regs 2015 - "output work" rules. Employer must either: (a) pay an hourly rate ≥ NMW for hours worked, OR (b) operate a "fair piece rate" system. Fair piece rate: based on average output of workers in that trade × 1.2 (the "120% buffer"). So if average piece-rate output is 50 units/hour at a rate generating £15/hour, the fair piece rate is set at a level that generates £15/hour for an "average" worker × 1.2 = £18/hour effective. Most modern piece-rate systems struggle to meet the fair-piece-rate test - HMRC scrutinises sectors like garment manufacturing, agricultural picking, courier delivery, gig-economy "task" workers. Recent court cases (Uber BV v Aslam [2021] UKSC) reclassified gig workers as "workers" not "self-employed contractors", bringing them within NMW scope. Many gig platforms now use hourly rate guarantees + bonus structures to ensure compliance. The "fair piece rate" formula is in Regulation 24, fact-specific by sector.
What about volunteers, interns, and unpaid trial work?
Genuine volunteers: NOT subject to NMW. The "voluntary worker" exception under Section 44 NMW Act applies to workers for charities, voluntary organisations, statutory bodies. Genuine volunteers receive no payment beyond reasonable expense reimbursement. Interns: most are WORKERS for NMW purposes (Edmonds v Lawson [2000] ICR 567). The "employment relationship" test trumps the "intern" label. Internships of more than ~4 weeks doing real work for the employer's benefit ALMOST CERTAINLY trigger NMW entitlement. HMRC has been aggressive on internship enforcement since 2018. Unpaid trial work: lawful for a SHORT trial - typically 2-4 hours, NOT a full shift. Trials beyond reasonable time become "work" requiring NMW pay. HMRC investigates "exploit unpaid trial" complaints in hospitality + retail. The 2-4 hour benchmark is HMRC's typical safe zone; beyond that they question whether work is genuinely a trial vs unpaid labour. Work experience (school + university): distinguished from internships - structured educational placements with limited work output, typically not subject to NMW under the "voluntary worker" reasoning if no fixed remuneration agreement. Time limits and HMRC scrutiny apply - typically up to 1 year before HMRC reclassifies.
Related calculators and guides
- UK salary take-home calculator - check NMW-equivalent net pay.
- Hourly rate calculator - hourly worker take-home + NMW headroom.
- Salary sacrifice 2026/27 - NMW floor constraint detail.
- Tronc + tips tax - separate tipping legislation (excluded from NMW).
- Optimum director salary 2026/27 - directors exempt from NMW for own salary.
- Employer cost calculator - full cost of employment per worker.
- Apprenticeship Levy - separate £3m+ payroll levy for apprenticeship funding.
- SMP comprehensive guide - related statutory pay framework.