Employers warned of £20,000 fines ahead of April minimum wage increases

Employers have been warned to review payroll processes ahead of increases to the National Minimum Wage and National Living Wage taking effect from 1st April, with potential fines of up to £20,000 per employee for non-compliance.

The warning from Capital on Tap comes as updated wage rates are set to be introduced at the start of the new tax year.

The National Living Wage for those aged 21 and is set to rise from £12.21 to £12.71 per hour, while the rate for 18 to 20-year-olds increased to £10.85.

Rates for under-18s and apprentices will both increase to £8.00.

The changes form part of a wider set of updates to employment costs, with Statutory Sick Pay rising to £123.25 per week and Statutory Paternal Pay to £194.32 from 6th April.

The Lower Earnings Limit for Statutory Sick Pay will also be removed, meaning it became available to all eligible employees regardless of salary, and payable from the first full day of absence.

Capital on Tap said increased HMRC enforcement means even minor payroll errors could result in significant penalties, with businesses urged to review systems and processes to ensure compliance.

Rebecca Alford, chief financial officer at Capital on Tap, said: “One of the most useful steps employers can take is to look beyond just the hourly rate.

“The minimum wage is calculated based on total pay over a specified pay reference period, so it’s essential to ensure that working hours are accurately recorded and that any deductions, such as for uniforms, tools, or equipment, do not unintentionally reduce pay below the legal minimum.

“Apprentices are another area to review carefully. The correct rate depends on both age and whether or not they are in the first year of their apprenticeship, so this should be checked regularly, particularly around birthdays or role changes.”

Alford added: “It’s important to keep clear records. Employers need to be able to show what they’ve paid and the hours worked, and having this information easily available makes it much simpler to identify and correct any issues early.

“If a mistake does happen, it’s best to resolve it quickly. Employers are expected to repay any arrears as soon as possible, and carrying out a simple payroll audit ahead of April can help businesses stay on track.”