Fair Work Agency gets ready to enforce a sharply increased national minimum wage in the UK

As the national minimum wage (NMW) becomes a potential concern for more employers, the Fair Work Agency (FWA) begins preparations to begin enforcing it from April 2027.

Increases to the NMW

Since 1 April 2026, NMW rates set by the Government have been as set out below. This represents a 4.1% increase in the headline rate, which is referred to as the 'National Living Wage '(NLW) rate* and an 8.5% increase in the 18 - 20 year old rate.

Particularly since the abolition of the separate rate for 21 – 22 year old workers from 1 April 2025, more employers, notably in sectors such as retail and hospitality, have had to raise wages to remain compliant. The minimum annual salary for a worker aged 21 and above who works a 37-hour week is now £24,454.

The rules concerning allowances and deductions are also strict. For example:

• Employers who provide accommodation as part of a role have to take care not to exceed the limit for permissible deductions (the 'accommodation offset') which is now £11.10 per day.
• Employers who use salary sacrifice schemes need to ensure that a salary sacrifice arrangement does not take the post-sacrifice pay below NMW rates. 
• Employers providing work experience and internships must also make sure they pay at least the applicable rate – there is no special rate for those who are working to gain experience.  

Enforcing the NMW

HMRC will remain responsible for enforcing the NMW for the time being, under a contract with the Fair Work Agency ('FWA'), which has now begun operations. The FWA will assume full responsibility for the NMW from April 2027 and will also start enforcing holiday pay from the same date. It has already taken over the existing enforcement role of the Employment Agency Standards Inspectorate and Gangmasters and Labour Abuse Authority.

The Government has recently published a policy paper on the operation of the FWA. This sets out a number of priorities:

• Reducing regulatory burdens: The FWA should develop an approach that is supportive of compliant employers, work with Acas to improve the clarity and accessibility of guidance for employers, explore the use of digital tools to reduce the administrative burden on businesses, and improve data sharing across enforcement functions.
• Raising profile and awareness: The FWA should work closely with Acas to increase awareness of routes to enforce employment rights and improve complaint routing. It should create a simplified and accessible digital 'front door' for workers and employers to report concerns and ensure that every complaint is assessed and responded to transparently. It should increase visibility of enforcement outcomes, through transparent publishing of data on outcomes and impacts.
• Thought leadership: The FWA should bring together regulators, civil society, business representatives, trade unions and academics to understand labour market risks, promote best practice and strengthen enforcement.
• Preparing for 2027 and beyond: The FWA should develop a joint operating model with Acas, consider how the full range of powers available can be deployed effectively, consider the effective use of civil proceedings and other powers under the Employment Rights Act 2025, including in relation to serious labour exploitation and relevant offences under the Fraud Act 2006  and prepare to commence holiday pay enforcement in 2027 and set out a clear plan to extend enforcement to other rights

The FWA is due to publish its first Statutory Enforcement Strategy in April 2027 and its first Statutory Enforcement Annual Report after the end of the 2027/28 financial year.

Comment

More employers are finding themselves having to reflect on whether their pay policies are NMW compliant and this trend seems set to continue. On 1 April 2026, the Low Pay Commission (LPC) launched its annual consultation, inviting written submissions to help it decide on the recommendations it will make to the Government on NMW rates for April 2027.

In particular the Commission is inviting invites views on:

• The affordability and effects of the LPC's estimate that, to maintain the NLW at two-thirds of median earnings (which continues to be the Government's preferred position), a rate between £13.02 and £13.34 (or an increase of between 2.4 and 4.9%) would be required in April 2027, with a central estimate of £13.18 (3.7%).
• The impact so far of increases in the NLW in April 2026 on workers, employers, the labour market and economy.
• The effect of recent minimum wage increases for younger workers on their employment prospects.

The consultation closes at 11.59 pm on 26 June 2026. If you have any views that you would like the Withers employment team to express on your behalf, please don't hesitate to get in touch. If you would prefer to respond directly you can do so using the link above.

* This should not be confused with the Real Living Wage, which is a higher, voluntary rate which businesses can choose to pay. 

This article is authored by Christina Morton, senior knowledge lawyer in the UK employment team.