From 1 April 2026, new National Minimum Wage (NMW) and National Living Wage (NLW) rates come into force. The main headline rate (NLW) will be £12.71 per hour. Details of the NMW rates for different age groups are shown below.
For business owners in and around Droitwich, if you employ staff, even just one person, this affects you.
Getting payroll wrong is not just an admin issue. It can impact your cashflow, profitability and PAYE compliance. Here’s what you need to know and what action to take.
Both the National Minimum Wage and the National Living Wage are legal minimum hourly pay rates set by the UK Government. The UK introduced the NMW in 1998 to protect workers from low pay and to set a legal baseline for hourly earnings. The NLW was introduced in 2016 to provide a higher statutory rate for older workers.
Employers must pay at least the correct rate based on a worker’s age and employment status. The key difference between the two wage rates is age.
The NMW applies to younger workers and apprentices. The NLW applies to workers aged 21 and over. The upper age limit was 23 years and over but was reduced to 21 years in April 2024. It is not a voluntary scheme; it is simply the highest band of the statutory minimum wage system.
There are currently four main hourly rates in place:
Rates are reviewed annually by the government and usually change each April. The aim is to protect workers from low pay while supporting fairness across the labour market.
The NMW and NLW apply to almost all workers in the UK. This includes full-time and part-time employees, temporary staff, agency workers, and apprentices, provided they are of school-leaving age or above.
Employers must pay the correct rate based on the worker’s age and circumstances. Underpayments can lead to HMRC penalties, arrears repayments, and reputational damage.
It is also important to remember that minimum wage compliance is not just about the hourly rate. Certain deductions, unpaid working time or salary sacrifice arrangements can reduce pay below the legal threshold if not handled correctly.
Staying up to date with annual changes is essential to remain compliant and to avoid unexpected payroll issues.
| Age Group | 2026 Minimum Hourly Rate | 2025 Minimum Hourly Rate |
| 21 and over (NLW) | £12.71 | £12.21 |
| 18 to 20 year olds (NMW) | £10.85 | £10.00 |
| 16 to 17 year olds (NMW) | £8.00 | £7.55 |
| Apprentice rate* | £8.00 | £7.55 |
*Notes re apprentice minimum hourly rates: Apprentices should be paid the apprentice rate if they are under 19 years old or aged 19 or over and in their first year of apprenticeship. Apprentices can claim the NMW for their relevant age if they are 19 and over and have completed their first year of apprenticeship. Apprentices aged 21 and over, who have completed their first year of apprenticeship, should be paid the NLW.
For many businesses, the increase in NMW and NLW will result in a significant rise in wage costs over the next 12 months. If you employ multiple team members on or near minimum pay, the total annual impact can be substantial.
Higher hourly rates mean increased payroll costs, higher employer national insurance contributions (NICs), potential pressure on margins and in some cases, a need to review pricing.
This is particularly relevant for labour-heavy businesses such as construction, engineering, retail and online fulfilment, many of which operate on tight margins.
At JRMA, we handle payroll for many local businesses across Worcester and advise clients on how to manage their finances more effectively. We recommend business owners implement the following actions in preparation for the wage increases:
Review your payroll costs for the 2026/27 tax year. In doing so, look at the basic pay increases, employers’ NICs and pension contributions. Then assess the annual impact. This feeds directly into your management accounts and profitability forecasts. If your margins are tight, you may need to review pricing or improve efficiencies elsewhere.
Higher wages mean higher monthly outgoings. Make sure your cashflow forecast reflects the increased payroll costs. This is particularly important if your income is seasonal or project based. Cashflow pressure often shows up a few months after changes like this. Forward planning avoids unpleasant surprises.
If you run your own payroll, check with your provider that the software has been updated with the new statutory rates from April 2026. Do not assume it will update automatically.
If you use an outsourced payroll provider, make sure they are aware of:
It is vital that your payroll is accurate. Underpaying staff can result in your business being issued with penalties from HMRC and reputational damage.
When minimum wages rise, it can compress the gap between junior and more experienced staff. You may need to review wider pay structures to maintain fairness and motivation across the team. This is not just a payroll issue. It is a commercial decision that could affect staff retention and morale.
Remember that minimum wage calculations include more than just the hourly rate. You must also consider unpaid working time, salary sacrifice arrangements and deductions for uniforms or equipment. Small errors can unintentionally push pay below the legal minimum.
At JRMA, payroll is not just about pressing a button and producing payslips. We check. We query. We make sure nothing has been overlooked.
As your outsourced payroll department, we can:
Our aim is simple. To give you accurate, timely information so you can make better decisions and profitably improve your business.
If you have any questions about processing NMW or NLW through your payroll, please get in touch with the JRMA team on 01905 796512 or email us at info@jrma.co.uk.
