The UK's minimum wage is set each year by the government on the advice of the Low Pay Commission, and it is an hourly rate that varies by age. For the 2026-27 tax year, from 1 April 2026, the top rate, the National Living Wage for workers aged 21 and over, is £12.71 an hour, with lower rates for younger workers and apprentices. The rate applies to every worker, including those on a fixed monthly salary. Compliance is checked by dividing the worker's pay for a period by the hours they actually worked in that period; the result must be at least their age-band rate.
That is why a monthly salary comfortably above the minimum can still fall short. In a month with extra shifts, or when a deduction such as a uniform charge lowers pay, the pay per hour worked can drop below the legal minimum. No headline rate has changed, but the shortfall is unpaid wages (arrears) that HMRC can pursue.
The rates that apply from 1 April 2026
The hourly minimum depends on the worker's age, and the rates are updated each April on the recommendation of the independent Low Pay Commission (National Minimum Wage Act 1998). For the 2026-27 tax year, from 1 April 2026:
- National Living Wage (NLW), age 21 and over: £12.71 per hour. This is the headline rate, up 4.1 per cent, and the NLW covers the large majority of adult workers.
- 18 to 20: £10.85 per hour.
- Under 18 (16 to 17): £8.00 per hour.
- Apprentice rate: £8.00 per hour, for apprentices under 19, or 19 and over in the first year of their apprenticeship. After the first year, an apprentice aged 21 or over moves to the £12.71 NLW.
The band depends on the worker's age, so a payslip has to reference a date of birth and, for apprentices, an apprenticeship start date. A worker who has their 21st birthday while employed becomes entitled to the higher National Living Wage rate, but only from the start of the next pay reference period after the birthday, not on the birthday itself.
How to check a worker is paid the minimum
Checking that a worker is on the minimum is not as simple as reading the hourly rate in their contract. What matters is what they actually earn for each hour they work. The rules measure this over a pay reference period, which is just the stretch of time the worker is paid for, usually a week or a month (National Minimum Wage Regulations 2015). The check itself is straightforward: take the worker's total pay for the period, divide it by the hours they worked, and the result has to be at least the rate for their age.
The rules define four types of worker, and the type determines which hours count in that calculation:
- Time work: paid by the hour or the shift. Hours worked are the direct measure.
- Salaried-hours work: a fixed annual salary for a set number of contracted annual hours, paid in equal instalments. The floor still applies to the actual hours worked, so hours beyond the salary basis can reduce the average.
- Output work: paid per item produced or task done, such as piece rates.
- Unmeasured work: everything else, where hours are not set. Pay is measured against either all hours worked or a written daily-average agreement.
Salaried-hours workers are the ones most often underpaid, because the salary is fixed while the hours are not. The monthly figure looks the same every month, so nothing on the payslip flags a problem. But in a busy month, that same fixed salary is divided across more hours, and the effective hourly rate can quietly drop below the minimum. For example, a £2,000 monthly salary is £13.33 an hour if the worker does 150 hours that month, comfortably above the minimum, but only £11.43 an hour if they do 175 hours, which is below the £12.71 rate.
Deductions that push pay below the minimum, and the accommodation offset
Accommodation is the only benefit in kind that can count toward the minimum wage. For 2026-27 the accommodation offset is capped at £11.10 per day, or £77.70 per week. If an employer provides live-in accommodation and charges at or below the offset, the charge is ignored for the minimum wage calculation. If the employer charges above the offset, the excess is treated as a deduction that reduces minimum-wage pay. If the employer provides the accommodation free, the offset amount is added to pay.
Almost every other deduction is subtracted from the worker's pay before the hourly-rate check is done. A charge for a uniform, for tools, or for equipment the worker needs to do the job comes off the pay that counts toward the minimum wage, and so does a salary sacrifice arrangement. If, after that subtraction, the worker's average hourly pay is below their age-band rate, the difference is an underpayment, no matter what the worker agreed to. Salary sacrifice for a pension or another benefit is lawful in general, but it cannot lawfully take a National Living Wage worker below £12.71 an hour.
Worked example: how a uniform deduction pushes pay under the minimum
Take a worker aged 21, entitled to the National Living Wage of £12.71 an hour, who works 160 hours in a month. At the minimum rate, their pay for the month is 160 × £12.71 = £2,033.60.
Now the employer deducts £15 a week for a branded uniform, about £65 over the month. Pay that counts for the minimum wage becomes £2,033.60 − £65 = £1,968.60. Divided by the 160 hours worked, £1,968.60 ÷ 160 = £12.30 an hour. That rate is below £12.71, so the month is an underpayment of £65, even though the contractual rate was exactly the minimum. The uniform charge, not the wage rate, caused the breach.
The salaried case works the same way. A worker on a flat £2,050 a month clears the floor at 160 hours (£12.81 an hour) but falls below the floor at 170 hours (£2,050 ÷ 170 = £12.06 an hour). The contractual rate never changed; the hours did.
HMRC enforcement: notices, penalties, and public naming
HMRC enforces the minimum wage, and the response to underpayment is not a warning. HMRC can issue a Notice of Underpayment requiring the employer to repay the arrears to the worker and to pay a penalty of 200 per cent of the arrears, capped at £20,000 per worker and with a £100 minimum. The penalty is halved if the arrears and half the penalty are paid within 14 days. The government also publicly names employers who underpay where the arrears owed exceed £500. Being named is a separate, reputational penalty: paying early can cut the fine, but it does not keep the employer off that public list.
Arrears are also recalculated at current rates, so historic underpayments are repaid at today's higher minimum, not the rate in force when the work was done. A small monthly shortfall left unnoticed across a year becomes a bill several times its original size.
Summary
The UK minimum wage is an hourly rate. For a salaried worker, the hours behind that fixed salary change from month to month, and deductions such as a uniform charge come off their pay before the hourly rate is worked out. So a monthly salary sitting above the minimum is not proof of compliance. The only way to be sure is to run the check every pay period: take the pay that counts after deductions, divide it by the hours actually worked, and confirm the result is at least the rate for that worker's age.
Flux runs this check on every payroll run. It applies the correct rate for each worker's age and the accommodation offset, and updates them each April. Because the hourly test runs every pay period, an underpayment from extra hours or a deduction shows up in that month's payroll, while it can still be corrected. Caught late, the same shortfall becomes an HMRC case: the employer repays the arrears, pays a penalty of up to 200 per cent, and is named on the government's public list of underpayers.
Niko Nurmentaus
Product Lead
Related Posts
