The cost of living has continued to increase due to rising prices for petrol, food and energy, along with high inflation levels. This combination has pushed many individuals to take out loans to cover the cost of essentials or resort to extreme budgeting.

With millions of people facing the cost of living crisis for some considerable time as the UK recovers from the pandemic, the Government has introduced policies to help alleviate the issue.

As a result of findings and recommendations from the Low Pay Commission, from April 2022 the National Minumum Wage and the National Living Wage are increasing. This will result in a 6.6% increase in wages for most workers.

In this article, we will cover the current and new wage rates, who is eligible, and frequently asked questions including what to do if you think you are being underpaid.

The National Minimum Wage is set and revised annually by the Government based on the recommendations by the Low Wage Commission.

Depending on your age and whether you are an apprentice, there are two rates of pay which are the National Living Wage and the National Minimum Wage. Employers are legally obligated to pay the correct minimum wage rate as set by the government.

What is the National Living Wage?

The National Living Wage is the highest rate of the National Minimum Wage. It was introduced in 2015 and was originally applicable to those over the age of 25. This was reduced to 23 years and over in April 2021.

In order to be eligible for the National Living Wage, you must be a worker over the age of 23 and not in the first year of an apprenticeship. The UK living wage is currently £8.91, rising to £9.50 in April 2022.

What is the National Minimum Wage?

National minimum wage entitlement applies to almost all workers including part-time, temporary, and casual workers. This is not the case, however, if you are:

  • Self-employed
  • A company director
  • A volunteer or voluntary worker
  • A family member of the employer, residing in the employer's home

National minimum wage rates are determined by your age and apply to those above school-leaving age regardless of your position within your company.

National Minimum Wage for Apprentices

If you are an apprentice employed under a Contract of Apprenticeship and under the age of 19, or 19 and over in the first year of your apprenticeship, you are entitled to the National Minimum Wage apprentice rate - this is currently an hourly rate of £4.30, going up to £4.81 in April this year.

National Minimum Wage Rates

Here are the full rates and the ages they are applicable to. The National Living Wage rates apply to those age 23 and over, whereas the National Minimum Wage rates apply to all workers under 23 unless you are an apprentice under 19 or over 19 years old and in the first year of your apprenticeship.

Age bandPrevious Rate April 2020-March 2021Current rateRate from 1 April 2022
23 and over£8.72£8.91£9.50
21 to 22£8.20£8.36£9.18
18 to 20£6.45£6.56£6.83
Under 18£4.55£4.62£4.81

What is the Real Living Wage?

The Real Living Wage is set by the Living Wage Foundation and is based on the cost of living.

The Real Living Wage campaign recognises that the cost of living in the capital city is higher than the rest of the country, unlike the National Minumum Wage and National Living Wage. This means that the Real Living Wage has two rates:

  • The UK Real Living Wage is £9.90 an hour
  • The London Real Living Wage is £11.05 an hour

A Real Living Wage employer voluntarily pays employees the Real Living Wage which is above the basic pay rates set out by the Government. There are currently 9751 accredited Living Wage employers in the UK.

The aim of the Real Living Wage movement is to encourage employers to pay workers wages that cover the real cost of living to reduce the number of individuals in poverty and to increase motivation, and employee retention.

What is the difference between the National Living Wage and the Real Living Wage?

The main difference between the National Living Wage (NLW) and the Real Living Wage (RLW) is that the NLW is set by the government and is a legal requirement for employers, whereas the RLW is set by the Living Wage Foundation and is voluntary for employers to pay.

Here is a direct comparison of the two:

National Minimum WageReal Living Wage
•Set by the government
•Legally enforceable for employers
•Must be paid to all employees over 23 years old
•The highest wage rate is £8.91 per hour
•Set by the Living Wage Foundation
•Voluntary for employers
•Applies to all employees over 18 years old
•The hourly rates are £9.90 for the UK and £11.05 for London

What do I do if I am not being paid the right amount?

It is against the law for an employer to pay less than the National Minimum Wage or the National Living Wage. Employers who have not paid their workers the wages they are entitled to can be fined up to £20,000 per worker, along with potentially being publically named and banned from being a director for up to 15 years.

If you think that you have been underpaid, speak to your employer. If this does not provide a solution to the problem you can:

  • Contact Acas (England, Scotland and Wales) or the Labour Relations Agency (Northern Ireland) for confidential advice on your employment rights.
  • Raise a grievance with your employer if your company has a procedure you can use.
  • Contact HMRC to make a complaint about your employer if the issue has not been resolved.
  • Make a claim to an employment tribunal

You will not be able to report an employer to HMRC at the same time as making a claim to an employment tribunal.

If you contact HMRC and they investigate your claim and come to the decision that your employer has underpaid you or a group of their employees, a Notice of Underpayment will be issued. Additionally, HMRC can issue a fine to your employer and potentially take them to court if they refuse to pay you the wages that you are entitled to.

Taking your employer to a tribunal is usually a last resort as it can be a lengthy, expensive process. Before you go to a tribunal you will need to contact Acas who will negotiate with your employer to reach an early conciliation. This is a free and less time-consuming process whereby an agreement can be made without going to a tribunal.

What do I do if my employer is paying me the apprentice rate before I have started my apprenticeship?

If you have not officially started your apprenticeship, it is against the law for your employer to pay you the apprentice rate as you are entitled to the rate applicable to your age. Speak with your employer or contact HMRC or Acas to resolve the issue.

If I am an apprentice in training, do I need to be paid?

Yes, time spent training on an apprenticeship is still considered work. Whether you are training at work, college or elsewhere, you are entitled to the National Minimum Wage for apprentices - this is £4.30 an hour.

Do tips from work count towards National Living or Minimum wage?

No, tips do not legally count towards your wages. Legally, neither the National Living Wage (NLW) nor National Minumum Wage (NMW) rates can be topped up by tips. If you are relying on tips to meet the applicable rate for NLW or NMW, you are likely being underpaid. If this is the case, speak to your employer, or contact HMRC or Acas.

Can the cost of tools and workwear be deducted from my wages?

Not if doing so results in your wages falling below the applicable rates for National Living Wage or National Minimum Wage within your pay reference period - this is the period in which you usually get paid e.g. monthly or fortnightly.

Companies can however charge you to cover the costs of equipment needed for your job if it is stated in your employment contract. The exception to this is Personal Protective Equipment (PPE) which companies are legally required to provide.

Will my wage change if I have had a birthday recently?

The National Minimum Wage and the National Living Wage are determined by your age, therefore if you have had your 18th, 21st, or 23rd birthday recently, you may be eligible for a different pay rate - your wages should be reviewed by your employer in due course. Again, if you think you are not being paid the wages you are entitled to, speak directly to your employer or escalate your to HMRC or Acas as necessary.