The latest increase to national living wage

At the end of last year, the government announced new rates for the national living wage. Employers should be mindful that the 2025 rates will come into force from 1 April. Here’s everything you need to know.

The change is in line with the new government’s emphasis on workers’ rights and pay, as part of which the Low Pay Commission (LPC) was tasked to review the process of setting wages. This is to ensure that the National Minimum Wage is aligned with the cost of living.

What is the national living wage?

Employers must pay a minimum on average for hours worked. This applies to all employees, workers and apprentices.

For anyone who is aged 21 or over, this is known as the ‘national living wage’ (NLW).  For anyone under the age of 21 (and over school leaving age), this is known as the ‘national minimum wage’ (NMW).

How much is the national living wage?

Who does the national minimum wage apply to?

The national minimum wage applies to:

• employees
• workers
• apprentices.

What is an apprentice?

For a person to be an apprentice, they must be:

• under 19; or
• 19 or over during the first year of their current apprenticeship agreement.

If neither of these applies, NLW or NMW for the relevant age band must be paid.

When do the new rates apply?

The new rates apply when:

• the rate is increased by the government (usually in April)
• the employee turns 18 or 21
• the apprentice turns 19 and has completed the first year of the current apprenticeship agreement
• the apprentice – who is already 19 – finishes the first year of the current apprenticeship agreement.

Pay reference period

The higher rate starts to apply from the next ‘pay reference period’ after the increase. This means someone’s pay might not go up straight away.

The ‘pay reference period’ is the period the pay covers. For instance:

• for daily pay, the pay reference period is one day
• for weekly pay, the pay reference period is one week
• for monthly pay, the pay reference period is one month.

The pay reference period cannot be longer than a month.

For example, pay will not go up straight away in the following scenario:

• There’s a minimum wage rate increase on 1 April
• The employee’s pay reference period is one month
• Each pay reference period starts on 16^th and ends on 15^th
• The old rate will apply until the next pay reference period starts on 16^th
• Which means:
  • The employee is paid the old rate from 1 April to 15 April
  • The employee is paid the new rate from 16 April to 15 May.

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