Significant increases to the living wage and minimum wage are set to come into force from 1 April 2025. Across all age brackets, minimum rates of pay increase.
The minimum wage was first introduced by Tony Blair’s Labour Government in the National Minimum Wage Act 1998. This act was the first to establish a minimum rate for all work.
The ‘National Living Wage’ was introduced in 2016, which set a rate for those age 25 and older. Over recent years the age threshold to which the National Living Wage applies has applied to younger and younger workers.
The National Minimum Wage effective from April 2024 applies to those age 21 and older, unless the apprentice rate applies.
The various minimum rates are decided by an independent body, the Low Pay Commission (LPC). Surprisingly, research suggests that increases in the minimum wage do not only benefit the lowest-paid workers.
The reason for this is that workers paid just above the minimum wage experience increases in pay to protect the pay differential between grades of jobs.
Over time the LPC has steadily increased the national living wage at a rate faster than average wage growth.
The aim is to increase the adult minimum wage as a percent of 25+ median pay, known as the ‘bite’. When first introduced in 1998, the bite was only 45%.
However, this has steadily increased over time, and the UK minimum wage in 2025 will represent a bite of around 66%.
As such, during times of high inflation from 2022 to 2024, whilst most workers experienced pay decreases in real terms, the lowest 20% of workers experienced real-term pay growth.
| Age | 2025 | 2024 | % increase |
|---|---|---|---|
| Age 21 plus | £12.21 | £11.44 | 6.7% |
| Age 18-20 years | £10.00 | £8.60 | 16.3% |
| Age 16-17 years & apprentices | £7.55 | £6.40 | 18% |
The HM Revenue and Customs (HMRC) enforces the national minimum wage on behalf of the Department for Business and Trade.
If an employer is found to have underpaid workers, the offending employer must pay all arrears to workers at the current rate.
Additionally, a fine of 200% of arrears is levied, capped at £20 000. The minimum penalty is set at £100.
The National Minimum Wage Act 1998 applies to the vast majority of workers. These include part-time workers, casual workers, disabled workers and foreign workers. Nonetheless, exceptions are made for specific categories of employees.
These include:
The real living wage is a voluntary programme to pay workers at a higher minimum rate, the real living wage. The rate is announced each November.
As of November 2024 this is £12.60 per hour for those working outside of London.
The rate of £13.85 applies for those working in the capital. This rate is calculated based on the cost of living, and over 15 000 employers are signed up for the scheme.
Employers are not legally obligated to pay at this rate of pay. However, employers who do so can be accredited by the Living Wage Foundation, which may support ethical credentials and support recruitment and retention of skilled staff.
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