National minimum wage: are you being underpaid?
Many who think they're on national minimum wage are actually being paid LESS than they should be. The Low Pay Commission says around HALF A MILLION people could be affected. This guide explains what minimum wage is, what it covers, and what to do if you've been underpaid.
What is the national minimum wage?
The 'national minimum wage' is the legal minimum an employer can pay anyone working in any UK nation. The rates go up on 1 April each year. The current rates are:
Rate since 1 April 2022
(2021 rate in brackets)
The new rates are applied to your first full pay cycle after 1 April.
The national minimum wage ISN'T optional. Regardless of what your contract says, your employer has to pay you the right amount – otherwise they're breaking the law. The main exception is if you work for yourself (as we've explained below).
- Agency workers
- Agricultural workers
- Casual labourers and workers on zero-hour contracts
- Employees on probation
- Foreign workers
- Offshore workers
- Employees who work from home
- Workers paid by commission
- Workers paid by the number of items they make
The only types of work that are NOT covered are:
- Self-employed workers running their own business
- Company directors
- Those in the armed forces
- Those doing work experience
- Those shadowing someone at work
- Those who've not reached school leaving age
- Those on a Jobcentre Plus Work trial for up to six weeks
- Those living and working in a religious community
Eight ways you may be being underpaid on minimum wage
If you're paid the legal minimum (as 2.5 million people in the UK are) there's no wriggle room in your salary. So any mistakes, like unpaid working time or wage deductions, put you at risk of being underpaid. Many who believe they are on minimum wage are in reality being paid less than they should be.
While bad bosses refusing to pay proper wages are an issue, most of the time underpayments happen by mistake. Look out for the following eight things to make sure you're not being underpaid:
1. Uniform or safety equipment shouldn't take you below minimum wage
If you need to buy things to do your job – like tools, safety clothing, or uniform (including dress-code appropriate clothes) – your employer must make sure any costs don't cause your wage to drop below the legal minimum. It doesn't matter how you pay for it: if you buy it in a shop, make a payment to your employer, or have the costs deducted from your salary – it all counts.
This includes: overtime, training time, travelling time, waiting time, and regular 'slivers' of time added on to shifts, such as being asked to arrive early to open up, or queuing to pass through security checks.
'Unpaid working time' also includes time spent on call at your workplace, and time spent travelling (if it's part of your job). For example, if you're a social worker doing home visits, your salary must cover the time it takes you to travel between each of your clients' homes, as well as the time you spend with them.
For example: Bobby Barista works in a coffee shop and is paid the national minimum wage. If he's working the first shift of the day, he's required to arrive early to help open up. This happens about twice a week, and takes 15-20 minutes each time. Because his boss doesn't pay for this extra time, Bobby's pay for these shifts falls below the legal minimum.
3. You should get a pay rise each April (and on certain birthdays)
The minimum wage rates increase each year on 1 April, and you'll also see an increase when you turn 18, 21 and 23 (when you start to get the confusingly-named 'national living wage'). You should expect to receive your pay rise from the first full pay cycle after an increase comes in. So if you're paid monthly, you should be paid the new rate from the first full month of work that comes after the increase.
If you're an apprentice, aged 19 or over, AND have completed the first year of your apprenticeship, you should also be paid the national minimum wage for your age, NOT the lower apprentice wage.
4. If your employer provides you accommodation, it can reduce your pay – but only by a set amount
There are complicated rules when it comes to housing provided by employers. This CAN be taken into account when working out whether you've been paid the correct minimum wage or not – and you could be paid LESS than the minimum wage (for your age) in exchange for providing you with somewhere to live. This is called 'offsetting'.
But your weekly salary can only be reduced by a maximum of £60.90 a week below the minimum wage. Any housing costs over this amount CANNOT be 'offset' against your salary. So, if your employer charges more than £60.90 a week for the housing they provide, they have to make sure that your base salary is high enough to ensure you're still getting the right minimum wage rate for your age.
On top of providing a place to live, things that can count as 'accommodation charges' include: rent, gas, electricity, furniture and laundry.
Freddie Farmhand is a 27-year-old farm worker who earns £468 a week for 48 hours of work. This works out to be £9.75 an hour (more than the current national living wage: £9.50).
However, Freddie lives in accommodation provided by his employer. He's charged £107 a week for rent and utilities, which he gives to his boss after he's been paid.
This impacts how we figure out whether Freddie's getting national living wage. We now have to take away the cost of accommodation from the amount he earns: £468 (Freddie's weekly pay) – £107 (weekly housing charge) = £361.
We then have to add the accommodation offset (£60.90), the amount Freddie's employer is legally allowed to reduce Freddie's wage by to pay for accommodation costs. So: £361 + £60.90 = £421.90.
It's from this figure that we can work out Freddie's actual hourly salary: £421.90 divided by 48 hours gives an hourly rate of £8.79. This is LESS THAN the minimum wage Freddie is legally entitled to, so Freddie is being underpaid.
Not all types of accommodation can be offset against your wage. To be eligible, one or more of the following need to apply:
- The housing comes with the job.
- Your employer or company owns or rents the property you live in – even if there's no direct link between the job and the accommodation.
- Your employer gets a payment from your landlord, or a member of the landlord's family.
There are some exceptions to these rules:
- If you're working for a local housing authority, or social housing provider and get accommodation from your work, this does not automatically count unless it's linked directly to your job (for example, you're a care warden who has to live on-site).
- If your housing is provided by a higher or further education institution where you're enrolled on a full-time course.
- The housing comes with the job.
5. Employers can't 'top you up' with tips or overtime
These CAN'T be used to 'top up' your pay – any tips or commission payments must be on top of the legal minimum wage for your age, regardless of whether they're paid through your payroll, or given to you by customers. If your contract says that you'll get a base salary plus commission, your 'base salary' must be AT LEAST the national minimum wage rate for your age.
If you're paid at a higher rate for overtime or certain shifts (such as night shifts or bank holidays), the extra amount you're paid can't be used to 'top up' your pay to meet the minimum wage. Your standard hourly rate must be AT LEAST the national minimum wage rate for your age.
If you are in a 'commission-only' role, you still have to be paid the correct national minimum wage rate. If you don't make enough commission during a pay reference period (the amount of time your pay checks cover), your employer must top up your pay to make sure you get at least the legal minimum.
The way this is worked out varies depending on your contract. It's either based on a 'fair' estimate of how long it should take you to do your work or, if you're required to work a fixed number of hours, you'll be due the legal minimum wage for these hours.
7. Don't think 'I work for a big firm so it must be correct'
It's not just small or new companies that fall foul of the rules. In 2021, 191 companies – including big names like John Lewis, The Body Shop International, and Sheffield United FC – were 'named and shamed' by the Government for failing to pay their employees correctly.
8. Don't accept the apprentice rate if you're not actually an apprentice
If your apprenticeship doesn't have a structured training element, you might be being underpaid.
To be classed as an 'apprentice', your contract must include some form of structured – and paid – training time. This training should have a clear timescale and aim (for example, specific skills you need to learn), and should also provide you with transferable skills you'll need to succeed in your future career.
If your job doesn't have this training element, you should legally be paid the minimum wage rate for your age, rather than the apprentice wage – even if you're called an 'apprentice' by the company you work for.
What to do if you think you are (or were) being underpaid
Step 1: Figure out if you've been underpaid
If you think it's likely you've been underpaid by a current (or previous) employer, there are a couple of checks you can do before making a complaint:
- The Government has a national minimum wage and living wage calculator to help you check what you should be getting paid.
- Call the ACAS helpline. ACAS can't provide legal advice, but can provide general advice and explain the risks and benefits of going forward with your complaint.
Step 2: Make a complaint
If you feel comfortable talking directly with your employer – perhaps you feel it may have just made a mistake – you can raise the issue with them directly. If that's something that you're nervous about, or if you no longer work at the company, you can get it sorted anonymously by getting in touch with HM Revenue & Customs (HMRC).
Ask HMRC to investigate
Starting an investigation is usually as simple as submitting this online form, and you can remain anonymous throughout. Make sure you tick 'yes' when asked if you're willing to be contacted by HMRC, as HMRC told us it's really difficult for it to continue the investigation if you don't.
If HMRC finds that your employer has not paid the correct minimum wage, it can:
- Make your employer pay you back the amount they've underpaid you, going back SIX YEARS. Anyone else affected in your company will also be refunded. Better yet, any pay you're owed will be paid at CURRENT minimum wage rates.
- Issue a fine against your employer for not paying you the right amount.
- Take your employer to court if it refuses to pay.
The main downside of going through HMRC is the time it takes – particularly if you work for a big company. When you submit a complaint, HMRC will look into the salaries of EVERYONE who works at your company, as well as all potential causes of underpayment. So it can take a while (often many months), but if any issues are found, everyone affected will get a refund.
Talk directly to your boss
If you'd rather not go down the formal investigation route, you may be able to resolve things informally by talking to your employer.
Before heading into the conversation, consider what outcome you're looking for: do you just want your pay increased going forward, or do you want any past underpayments repaid too?
Go into the discussion armed with information to support your case, and a clear idea of the amount you think you're owed. This could be as simple as showing your employer the latest government guidance along with your current payslips, or it may require a bit more digging – particularly if you think you've been underpaid for years.
If the issue isn't resolved with an informal chat, you can submit a formal complaint (usually just by writing a letter laying out what's wrong). If your boss doesn't reply, or you're not happy with the outcome, you can take your complaint to ACAS by filling out this form or calling 0300 123 1122.
You even have the right to go to an employment tribunal (which can look at whether you've been treated unfairly, as well as if you've been underpaid). But if your complaint is just about being underpaid, we'd probably suggest you submit a complaint to HMRC.
Worried about how your boss will react?
At any point during the process, you can call the ACAS helpline to talk through your options. It can't provide legal advice, but can explain the risks and benefits of going forward with your complaint.
It can also provide support if you're worried about the impact that complaining could have on your work life. For example, while you can remain anonymous during the HMRC investigation process, if you're working for a small business there's no guarantee that your employer won't try to guess who's made the complaint. ACAS can provide guidance if you think you're being treated unfairly as a result of your complaint.
If you're a member of a trade union, you can also get in touch with it for support. You may be able to bring a trade union representative with you to meetings with your boss, if you'd like the extra support.
Why MSE doesn't use the term 'national living wage'
Over to MSE founder Martin Lewis to explain...
We won't use the term 'national living wage'
Back in 2015, watching the Budget I was shocked to hear then-Chancellor George Osborne announce he was renaming the minimum wage for then over-25s (now over-23s) as the 'national living wage'. I spoke out at the time. This was stealing the brand of the Living Wage Foundation – a charity I've long supported.
The Living Wage Foundation each year announces its REAL living wage, which is a voluntary employers' wage scheme, based on an assessment of the actual cost of living. Currently it is set at £10.90 per hour for the whole of the UK, except London, and £11.95 in London.
Almost 10,000 UK employers have pledged to pay the real living wage. You can check whether yours is one of them on the Living Wage Foundation website. So when we refer to the living wage on the site, we mean the real living wage, not the attempt at spinning the national minimum wage.
Struggling on national minimum wage?
Here are a few extra resources if you're on minimum wage and finding it hard to cope:
- Cost of living survival guide. See our collection of 90 ways to keep afloat.
- Check what state help you can get. Benefits aren't just for the unemployed, they're also designed to support low-income workers. Use our 10-minute benefits calculator to see if you're eligible for any.
- Look out for grants. Hundreds of charities give out grants, ranging from help to cover bills and other expenses, to buying furniture. See our Grant grabbing guide.
National minimum wage FAQs
The national minimum wage is the official name given to the lowest amount an employer can legally pay a worker under 23. If you're 23 or over, the legal minimum amount you can be paid is called the 'national living wage' – it's still the minimum wage, just a different name (and not to be confused with the "real living wage").
Yes, an employer HAS to pay you the right minimum wage rate for your age. It's illegal for them to pay you any less. So if you're 23 or older, the national living wage is the minimum amount you can be paid per hour.
No. The national minimum wage and the national living wage both increase each year in April. You should get paid the new national rates for your age in your next FULL pay cycle after the increase comes in.
You can find the old national minimum wage rates on the Gov.uk website.
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