Navigating the minimum wage increase in the UK

On 1 April 2025, the UK’s minimum wage rates changed again. The biggest shift? The National Living Wage now kicks in at age 21 instead of 23. That means more workers now have a right to the highest rate. And for employers, that means higher payroll costs,  especially if you’ve got a younger team.

The other minimum wage rates also went up. So if you’ve got apprentices, part-timers, or junior staff, you’ll need to make sure everyone’s pay is up to date.

In this article, we discuss exactly what’s changed, how it impacts your business, and what you can do to stay compliant and keep costs under control. 

All information in this article is accurate as of April 2025. Minimum wage rates and employment laws can change, so make sure you check the latest official guidance before making any decisions.

UK minimum wage increase 2025

Here's a breakdown of the new rates that kicked in on 1 April 2025:​

• National Living Wage (21 and over): £12.21 per hour
• 18 to 20-year-olds: £10.00 per hour
• 16 to 17-year-olds: £7.55 per hour
• Apprentices*: £7.55 per hour​

The most significant change is the extension of the national living wage to include workers aged 21 and over. This has dropped from the previous threshold of 23.

The aim of these adjustments is to support workers with the rising cost of living. But, they also present challenges for employers. This is especially true for those in sectors with tight margins or younger staff. 

*Apprenticeship rate only applies if the apprentice is under 19, or 19+ and in the first year of their apprenticeship. Otherwise, pay must match the minimum wage for their age.

What the minimum wage increase means for UK employers

If you’ve already bumped up your pay rates in your payroll system to the current rates, good on you. If not, know that it requires more than just updating one number in your payroll system. The changes have a knock-on effect across your team and budget. This is especially true if you’ve got younger workers, lots of part-timers, or staff in lower-paid roles. Here are some of the business impacts of the minimum wage increase: 

Increased payroll costs across many roles

This one hits straight away. If you run a shop, café, or a health and social care business, for example, chances are several team members just jumped to a higher pay rate. That includes 21- and 22-year-olds now on the national living wage, and junior staff who were already close to the old minimums.

The national living wage increased by £0.77 per hour, from £11.44 to £12.21. For an eligible employee working 30 hours a week, that's an extra £23.10 per week, or about £100 per month. Multiply that across your team, and you’ll see the additional costs can pile up quickly.

Knock-on effects on pay structures

When the minimum wage rises, the space between roles can shrink. Suddenly, your entry-level team might be earning almost the same as their supervisors. That’s a problem. And not just for budgets, but also for morale. If you don’t reward responsibility properly, good people may start to question why they’re still doing the harder job.

Mistakes are easy (and expensive)

It’s not just about knowing the new rates. You also need to track when people age into a higher bracket, when apprentices finish their first year, and when casual rates need updating. Miss any of that, and you could be underpaying someone without realising.

And His Majesty's Revenue and Customs (HMRC) doesn’t care if it was an accident. Fines, back pay, and public naming are all on the table.

Strategies to manage the national minimum wage increase

Now the new rates are in place, it’s time to adapt. If your margins are already tight, you need a plan, fast. Here are some strategies that can help you stay compliant, cut waste, and keep your team on side:

Audit your current pay rates and structures

Start with the basics. This can include going through your current pay data and checking who’s earning what. Don’t just look at base rates. Check overtime, shift differentials, and bonuses too. Make sure nobody’s below the legal minimum. And look for any roles where the pay gaps no longer make sense.

Example: You might find your kitchen assistants are now on £12.21, but your shift supervisors are only earning £12.50. That’s a 29p difference for a lot more responsibility. It makes the supervisor role a harder sell. And some team leads might start looking elsewhere unless you adjust that gap.

Revisit your workforce planning

Once you sort your pay rates, look at who’s working when and whether that setup still makes sense. Just because a shift roster worked last year doesn’t mean it’s the best option now, especially when every hour costs more. Ask yourself:

• Are we over-staffing quiet shifts?
• Are we using high-cost workers for low-value tasks?
• Are we relying too much on weekend staff when weekday shifts are cheaper?

Example: You run a café that’s quiet on Monday mornings. But you’ve got three junior staff on the floor. They’re each on £12.21 an hour and spending most of the shift wiping tables. You may be better off with one experienced team member who can run the counter, take deliveries, and tidy up, even if they’re on £13.50. It saves money and gets more done.

Automate payroll and compliance tasks

If you’re still doing payroll manually, it’s only a matter of time before something slips through. Minimum wage laws aren’t just a once-a-year update. They change based on birthdays, apprenticeships, time served, and more. So, if your system doesn’t catch these things automatically, you’re likely to miss them.

Beyond avoiding fines, automating payroll and compliance tasks can save time. It can also help you keep things accurate and give you peace of mind that you’re paying your team properly every single time.

Example: Let’s say you’ve got an apprentice who just turned 19 and finished their first year. This meant that they’re no longer eligible for the apprentice rate. If your system doesn’t flag it, you’ll keep paying them £7.55 when you should’ve bumped them to £10.00. That mistake adds up fast, and so will the penalties when HMRC comes knocking.

Consider broader compensation strategies

You have to pay at least the minimum wage. That’s not optional. But once you’ve done that, there’s still the question of how to keep staff engaged, motivated, and sticking around. This is especially true if you can’t afford to lift everyone’s pay much further right now.

In this case, think about the things that matter to your team. For example, extra time off, set shift patterns, free meals, paid training, or helping them get qualifications. These things don’t cost as much as a pay rise, but they still add value. And they show your team you’re investing in them.

Example: Let’s say you run a care home and can’t raise wages across the board. You’re already paying the legal minimum, but you want to offer something more. So you give your support workers the chance to do their Level 3 Health and Social Care training during paid hours. That way, they’re building skills, you’re boosting retention, and you don’t need to stretch your hourly rates even further.

Rippling: Because your payroll system matters more than ever

Minimum wage rules just got tricker. There are different age bands and apprentice exceptions to think of. And rate changes happen at least annually. So, if you're tracking it all by hand, mistakes are almost guaranteed.

Rippling’s payroll software can handle all the finer details. And it can do it all automatically. The system knows how old someone is, what rate they’re meant to be on, and when that rate needs to change. They turn 21? Rippling bumps them to the National Living Wage. They finish their first year as an apprentice? It switches their pay to the right level. When minimum wage rates change, Rippling updates them for you.

Because Payroll sits inside Rippling’s all-in-one HR and workforce platform, everything, from HR to Payroll, IT, and Spend, can stay in sync. Change someone’s role? Update their hours? Make them permanent? That update flows straight into payroll, time tracking, and everything else. That’s one change, done everywhere.

So, if you’re serious about compliance but sick of admin, this is the kind of system that actually saves you time, reduces errors, and takes the heavy lifting out of staying compliant. 

National minimum wage and national living wage increase FAQs

Is it illegal to pay less than the minimum wage in the UK?

Yes. It’s against the law to pay staff in the UK less than the national minimum wage. That applies to small local businesses, big global businesses, and everyone in between.

Even if an employee agrees to it, it’s still not allowed. You’ve got to make sure every worker is paid correctly, based on their age, job type, and employment status. If you don’t, HMRC can fine you, make you repay underpaid wages, and publicly name your business.

The only exceptions are things like work experience placements or genuine volunteers. But even then, those are very limited.

How often does the UK minimum wage increase?

The national minimum wage usually goes up once a year, on 1 April. The Low Pay Commission reviews the rates and recommends changes based on things like inflation, job growth, and living standards. From there, the government announces any increases and sets the new rates for the next tax year.

What should I do if I haven’t updated my employee pay rates yet?

Firstly, don’t panic. But don’t wait, either.

Go back and check what everyone in your team is earning. As mentioned, every age group got a pay rise this year, and the national living wage now starts at 21, not 23. So, this change could affect more staff than you think.

Start with anyone on hourly rates, then look at apprentices, part-timers, and junior roles. But don’t stop there. Even staff who were slightly above minimum before might now be under the new legal rates.

If you're underpaying anyone, fix it straight away. You’ll need to backdate the difference to 1 April 2025. Then take a look at how you’re tracking pay changes. If you’re still doing it manually, this is the kind of thing that causes chaos. Payroll software like Rippling can catch things like this for you, automatically.

Do I need to increase wages for employees already above minimum wage?

Not legally. If someone’s already earning more than the national minimum wage, you don’t have to lift their pay just because the legal minimum went up.

But, and it’s a big but, it might still cause problems if you don’t. When entry-level roles jump up in pay, they can start closing the gap between other positions. Suddenly, your more experienced team members might be earning just a few pence more than your new hires. That can create tension fast.

If someone’s doing a harder job, managing others, or working unsociable hours, and the pay difference feels tiny, they might start looking elsewhere. And if one person leaves, others can follow.

So while you don’t have to increase higher-paid wages, it’s worth looking at the bigger picture. Small pay bumps, performance bonuses, or other rewards can help keep things fair, and stop good people walking out the door.

This blog is based on information available to Rippling as of May 2, 2025.

Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.