Difference Between the National Minimum Wage and the National Living Wage

As an employer in the UK, navigating wage regulations is crucial for your business’ success and legal compliance. Two key concepts you will encounter are the National Minimum Wage (NMW) and the National Living Wage (NLW). Understanding the difference between the NMW and NLW is not just good practice—it is essential for avoiding hefty penalties and potential legal issues. Failing to pay the correct wage can result in significant fines or even criminal convictions, making it vital to get it right.

In this article, we will break down the key differences between the National Minimum Wage and the National Living Wage, helping you ensure that every team member receives fair and legally compliant compensation. Let us dive in and make sense of these important wage regulations together.

What is the National Minimum Wage?

As an employer, you must pay your workers at least the minimum wage per hour. Notably, the size of your business is irrelevant. Where your employee is of school-leaving age and under 21 years old or classed as an apprentice, you must pay them the National Minimum Wage. 

The National Minimum Wage applies to all workers and employees regardless of working hours. It also applies, for example, to workers and employees training on the job, on probation, working from home, and agency workers. 

Notably, there are circumstances where the National Minimum Wage does not apply. For example, it does not apply to:

• those who choose to be self-employed;
• those who choose to work as volunteers;
• company directors;
• members of the armed services;
• those carrying out work experience as part of a course;
• people who are work shadowing; and 
• those who have not reached school leaving age.

The Current Rate

The National Minimum Wage varies slightly according to the age of the person working for you. The current rates for the National Minimum Wage can be found here.

This table shows you the rates of the National Minimum Wage according to the worker’s age, which will apply from 1 April 2025 to 31 March 2026.

Additionally, the apprentice rate only applies to apprentices under 19 or those over 19 who are in their first year of apprenticeship. A person aged 19 or over who has finished the first year of their apprenticeship should receive the National Minimum Wage that applies to their age.

What is the National Living Wage?

Like the National Minimum Wage, paying the National Living Wage is a legal obligation for employers. So, you must pay your staff a minimum hourly wage no matter the size of your business. However, the National Living Wage only applies to those aged 21 and over. 

The National Living Wage applies to all workers and employees in the same way that the National Minimum Wage does. However, unlike the National Minimum Wage, it does not apply to certain workers.

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The rate for the National Living Wage from April 2025 is £12.21 per hour. Similar to the National Minimum Wage, the National Living Wage is reviewed yearly by the Government. Changes to the National Living Wage rate occur in April each year alongside the National Minimum Wage changes. 

The current Labour Government accepted the Low Pay Commissions’ recommendations to update the National Minimum Wage and National Living Wage, which will take effect in April 2025. This move is part of the Government’s aim to eventually establish a single National Minimum Wage regardless of age.

For more information, read our article on the 2024 UK Budget. 

National Minimum Wage vs National Living Wage

The National Minimum Wage and the National Living Wage are two different terms, but they have a few differences. Much of what applies to one also applies to the other. 

The following are the key differences between the National Minimum Wage and the National Living Wage:

• the National Minimum Wage applies to those under 21 years old but who are over school leaving age and those who are apprentices. However, the National Living Wage applies to those aged 21 years old and above;
• the National Minimum Wage consists of three different amounts, but the National Living Wage is one set amount; and
• the National Minimum Wage varies according to the age of the worker or employee and the apprenticeship stage. However, the National Living Wage does not change according to the worker’s age or apprenticeship status.

Key Takeaways

Paying the National Minimum Wage and the National Living Wage to your employees and workers where they qualify is a legal duty. HMRC can issue you a fine if you fail to correctly pay either the National Minimum Wage or the National Living Wage. Likewise, you risk the court charging you with a criminal conviction. Whilst the National Minimum Wage and the National Living Wage are two different terms, there are a few differences between the two. Both apply to almost all workers and employees. 

If you need help understanding the National Minimum Wage and the National Living Wage, our experienced employment lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. So call us today on 0808 196 8584 or visit our membership page.

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