National minimum wage 2026: Key updates, risks, and employer responsibilities

The National Minimum Wage was introduced in 1998 and took effect the following April, with rates rising annually since. As we approach that date in 2026 we look at what issues employers need to consider in order to act fairly and ensure that they discharge their legal responsibilities.

Managing National Minimum Wage (NMW) legislation is much more complex than simply paying a worker the correct rate per hour. This is particularly so where wages continue to rise and bring wage compression. With minimum rates catching up with higher rates of pay, employers are more prone to mistakes where deductions and employee benefits could take pay below the threshold. In 2025 over 500 employers were fined a total of £10.2 million after failing to pay correctly. In this article we review some of the rules and possible pitfalls for the unwary employer.

What is new in 2026?

Fair Work Agency

The new Fair Work Agency will be formally established in April 2026 and have enforcement powers dealing with breaches of SSP, NMW and holiday payments. It will have the power to enter premises, inspect documents, bring proceedings on behalf of workers, issue notices of underpayment and recover its costs in doing so.

New rates

• From 1 April 2026 the National Minimum Wage for over-21s will increase by 50p per hour to £12.71 – that’s a rise of 4.1% (following a 6.7% rise, which took effect from April 2025).
• At the same time, workers aged 18 to 20 will get a bigger increase to the National Minimum Wage of 8.5%, to £10.85 an hour (following a 16.3% rise in April 2025.)
• Workers aged 16 to 17 will get a 6% increase to £8 an hour (following an 18% rise in April 2025).

The National Minimum Wage (NMW) is:

How can employers get it wrong?

 Unfortunately, there are several ways in which an employer can break the rules.

• Deductions from wages– government data shows us that these are the most common cause of mistakes. For example, otherwise legitimate deductions from wages for certain items of expenditure such as uniforms or work tools. If these deductions push the actual pay received by workers below the NMW, employers will be found to be in breach.
• Salary sacrifice schemes– arrangements like pension salary sacrifice, cycle to work schemes and childcare vouchers are often introduced by employers to provide their staff with a cost-effective benefit. However, salary sacrifice reduces the overall salary and even one-off salary sacrifices can lead to a breach of NMW. The most recent Budget plans for changes to the rules on pension salary sacrifice from April 2029 and anyone trying to maximise the current rules before that time may risk breaching NMW rates.
• Missing dates/being unprepared for rate rises– another commonly identified error includes failing implement the rise each April is implemented. This can happen where budgets did not allow for the increase and/or payroll was not updated in time.
• Failing to keep up to date with employee changes– with different bands depending on age, care needs to be taken to monitor those moving to a higher rate. The NMW pay band needs to be adjusted promptly where a worker moves into a different age band.

Reliable systems need to be in place to ensure regular monitoring, awareness and retention of records. These are all things that will be tested when the Fair Work Agency gets up to speed and we expect to see a lot of cases in due course.

Which employers have made mistakes?

Those who featured in the 2025 “named and shamed” list included Genting Casinos, Go Outdoors, Centrica PLC, Holland & Barrett Retail and Hugo Boss Ltd. If in doubt, take advice to make sure that you do not feature on the 2026 list!