The National Living Wage moved to £12.71 an hour on 1 April 2026. For Devon employers in care, hospitality, hair and beauty, holiday lets and cleaning, the new rate lands at the same time as the Fair Work Agency, with bigger penalties, faster naming, and a much broader inspection remit. This is a working guide to what changed, where the common gaps sit, and what to do about them now.
Quick answer: From 1 April 2026 the National Living Wage is £12.71 an hour for workers aged 21 and over, with lower rates for younger workers and apprentices. Devon employers must check actual hourly pay across every pay reference period, fix unlawful deductions, and correct sleep-in and tronc arrangements before the Fair Work Agency arrives. Self-correction is treated far more favourably than enforcement.
The Low Pay Commission recommendation was accepted in full, and the new figures sit inside the National Minimum Wage Regulations 2015 as amended for the 2026 to 2027 year. The headline number, the National Living Wage for workers aged 21 and over, increases to £12.71 per hour. The other rates have moved upwards in step.
The Low Pay Commission has been clear that it intends to keep narrowing the gap between the 18 to 20 rate and the full adult rate over the coming years, which means employers who rely on younger staff need to budget for further compression rather than another flat year. The apprentice rate now matches the 16 to 17 year old rate, removing a small but persistent area of payroll error where an apprentice in their second year and aged 19 or over was accidentally left on the apprentice rate when they should have moved up.
The new rate is universal, but the impact is not. In Devon, the sectors carrying the highest exposure are care, hospitality, hair and beauty, holiday lets, and cleaning. These are the same sectors the Fair Work Agency has named as enforcement priorities for its first inspection cycle, which is not a coincidence.
Care providers run on tight margins, with a workforce that is largely paid at or just above minimum wage, and with complex working patterns that include sleep-ins, on-call hours, training time and travel time. Hospitality runs seasonal, variable-hours rotas with significant reliance on tips and service charges, both of which sit outside the NMW calculation. Hair and beauty salons combine PAYE staff with chair renters and self-employed stylists, and the line between the two is often drawn more by convenience than by HMRC's status tests. Holiday let cleaners are often paid on a flat per-property rate that, once divided across the actual time the work takes, drops below the new £12.71 floor. Contract cleaning businesses face the same calculation across a different physical environment, with the added pressure of TUPE transfers and subcontracted labour.
In each case, the rate change does not just mean a payroll uplift on 1 April. It means recalculating contracts, deductions, allowances and shift patterns to make sure the actual hourly rate, in the eyes of the law, remains above the new floor in every pay reference period.
The National Minimum Wage Act 1998 and the National Minimum Wage Regulations 2015 do not measure compliance by your contractual hourly rate. They measure it by the actual hourly rate paid in the pay reference period, which is normally a week or a month depending on how often the worker is paid. The actual hourly rate is calculated as total qualifying pay in the period, divided by total working time in the period.
Total qualifying pay includes basic pay, certain bonuses and shift premia, and any payment for overtime worked in the period. It excludes tips, service charges and tronc payments, expenses, benefits in kind other than the accommodation offset, and most allowances. Total working time includes all hours where the worker is required to be at the place of work and available for work, with specific rules for time work, salaried hours work, output work and unmeasured work.
The gap between contractual rate and actual rate is where most underpayments live. A salon assistant on a contract that says £12.71 may, in practice, be on £11.90 once a chargeback for product breakages, a flat training deduction and an unpaid first ten minutes of every shift are factored in. A care worker on £13 an hour for waking time may, in practice, be on £11.50 once unpaid travel between calls is added to total working time. Neither employer set out to underpay. Both are exposed if a Fair Work Agency inspector runs the same calculation.
The accommodation offset is the only deduction the law allows to take pay below the National Minimum Wage, and the cap is £10.66 a day from April 2026. That figure is a daily maximum, not a recommendation. If an employer charges £15 a day for accommodation, and the worker is on the new £12.71 floor, the extra £4.34 above the offset reduces the worker's actual hourly pay below the minimum, and the underpayment is unlawful.
In Devon, this catches out a small number of holiday lets and farm employers who provide on-site accommodation as part of a seasonal contract, and a slightly larger number of care employers who house staff in flats above the home or in adjacent properties. Where the offset is calculated correctly, and the daily charge is at or below the £10.66 ceiling, the arrangement is lawful. Where it is not, the back-pay liability can be substantial across a six-year window.
The Supreme Court ruling in Royal Mencap Society v Tomlinson-Blake (2021) settled the long-running argument over how sleep-in shifts are paid for the purpose of the National Minimum Wage. Only the hours a worker is awake for the purpose of working count as working time. The hours during which the worker is permitted to sleep, and is not required to be performing duties, do not count, even if the worker is on the premises and on call.
In practical terms, a residential care provider can pay a flat sleep-in allowance for the night, provided that any time the worker is woken to perform duties is paid separately at or above £12.71 an hour. The risk is in the records. If the rota shows a worker on a ten-hour sleep-in, and there is no log of waking time, an inspector will treat the entire ten hours as unpaid working time, unless the employer can demonstrate otherwise.
This is the area where Devon care providers are most often exposed. Many homes still operate on a pre-2021 sleep-in calculation, paying a single flat shift rate and assuming it covers everything. The 2021 ruling means a flat shift rate is lawful only if the waking time within it is paid separately and meets NMW for those hours. The April 2026 rate increase widens the gap on every shift where the calculation is wrong.
Tips, gratuities and service charges cannot be used to make up the National Minimum Wage. This rule has been on the statute book for years, and it was reinforced by the Employment (Allocation of Tips) Act 2023 and its accompanying code of practice. The contractual hourly rate paid through payroll must, on its own, meet the minimum. Any tronc allocation is paid on top.
In a Devon restaurant or pub kitchen, the trap is the headline figure given to a new starter. A kitchen porter offered £13 an hour, where £11.50 comes through payroll and £1.50 is the average tronc allocation, is being offered an unlawful contract. The payroll figure has to clear £12.71 in its own right. The tronc must be paid separately, allocated fairly under the Tips Act code, and not relied on as part of the minimum wage calculation.
A second area of risk is service charges that are paid through the till and processed as turnover, then redistributed to staff as part of their net pay rather than through a properly operated tronc. That structure has been a focus of HMRC enforcement for some years and is one of the first things a Fair Work Agency inspector will check in a hospitality business.
Across employment compliance audits in care, hospitality, salons and seasonal tourism, the same handful of errors come up over and over again. None of them are deliberate. All of them produce a National Minimum Wage breach.
Most of these surface as a single line in a payroll spreadsheet. None of them are obvious to the employer until someone runs the actual hourly rate calculation across a full pay reference period. That is exactly the calculation a Fair Work Agency inspector will run.
The Fair Work Agency launched on 7 April 2026 with consolidated enforcement powers over the National Minimum Wage, employment agency conduct, holiday pay, modern slavery and labour exploitation. It inherits the HMRC NMW enforcement team, the Employment Agency Standards Inspectorate and the Gangmasters and Labour Abuse Authority, and it has the breathing room created by Employment Rights Act 2025 Schedule 7 to act across all of those areas in a single inspection. Our full breakdown is in the Fair Work Agency pre-assessment service page.
On a National Minimum Wage inspection, an FWA officer will typically ask for payroll records covering the last six years, employment contracts, deduction records, rota and time records, sleep-in logs where relevant, tronc records where relevant, accommodation charge records where relevant, and right-to-work files. They will then sample workers, calculate the actual hourly rate for the sampled pay reference periods, and compare the result with the legal minimum for that worker's age band and apprenticeship status.
Where the actual hourly rate falls below the minimum, the FWA can issue a Notice of Underpayment requiring back payment to the worker, impose a civil penalty of 200 percent of the underpayment capped at £20,000 per worker, name the employer publicly where total arrears across the workforce exceed £500, and refer cases involving wilful or repeated breaches for criminal prosecution.
If you find a gap, the calculation has to be done in the way the law requires, not the way that is most convenient for the payroll system. The arrears are calculated at the current minimum wage rate, not the historic rate that applied when the underpayment occurred. A worker who was underpaid by 30 pence an hour in 2022, when the adult rate was £9.50, is owed arrears today at the 2026 differential applied to the 2026 rate. That is a deliberate feature of the system, designed to keep the cost of underpayment rising in line with the cost of compliance.
The arrears window is six years for civil enforcement under the Limitation Act 1980. The FWA can look back the full six years in a single inspection, and once a breach is identified, the burden is on the employer to demonstrate that the same calculation method did not apply across the rest of the workforce.
The civil penalty is 200 percent of the underpayment, capped at £20,000 per worker, with a minimum of £100 per Notice of Underpayment. Public naming applies where total arrears across the workforce exceed £500. A small employer with five workers each underpaid by an average of £200 a year over four years is therefore looking at £4,000 of arrears, an £8,000 penalty, and a public naming. Most Devon SMEs hear that figure and discover that it is several times their annual compliance budget.
Self-correction is treated far more favourably than enforcement. The FWA's published approach, in common with the HMRC NMW team it inherited, gives weight to employers who identify their own breaches, pay the arrears in full, document the fix, and put a corrected calculation in place before any inspector arrives. The civil penalty regime still applies in principle, but the FWA has discretion on how to use it, and a documented self-correction sits at the lighter end of that range.
The practical sequence is straightforward. Identify the population of affected workers. Calculate the arrears at the current minimum wage rate, going back as far as the records support, and up to a six-year limit. Pay the arrears through payroll, with the correct tax and National Insurance treatment, as a single back-pay line. Issue corrected payslips. Document the cause, the calculation method, the population, the amounts paid, and the change put in place to prevent recurrence. Keep that file. If the FWA arrives, that file is the difference between a light-touch inspection and a Notice of Underpayment with a 200 percent penalty attached.
For anything that touches on contractual variation, restrictive covenants or settlement of disputed amounts, talk to a solicitor. We do not provide regulated legal advice. What we do is audit the underlying compliance position so that you know what to fix, and so that any solicitor you instruct is working from a clear factual baseline rather than guessing at what the records say.
Across the Devon employment compliance audits we have completed since the FWA launched, the exposure is concentrated in four sectors.
Care providers carry the biggest sleep-in liability. The combination of a 2021 ruling that many homes have not fully implemented, a workforce paid at or close to the minimum, and a six-year arrears window produces some of the largest individual back-pay figures we see. A medium-sized home with twelve staff on regular sleep-in shifts can accumulate a five-figure arrears total very quickly if the waking-time log is not in place.
Hospitality businesses are exposed on tronc, service charges, unpaid handover and changeover time, and the structure of seasonal contracts. The Devon visitor economy runs on a workforce that swells in July and August and contracts in November, and the contracts under which those workers are engaged are often informal, variable and not consistently checked against the minimum wage calculation. Our employment compliance audit works through exactly those records.
Hair and beauty salons are exposed on chair rental and self-employment status, on uniform and product deductions, and on training-cost recovery clauses that take the trainee below the minimum on the way out the door. The Fair Work Agency is the same body that inherits the enforcement remit on disguised employment, and it has been clear that salons sit in its first wave of inspection priorities.
Holiday lets and cleaning businesses are exposed on per-property pay rates that, once divided across the actual time the work takes, drop below the minimum, and on unpaid travel time between properties. The pay rate looks reasonable in the abstract. The actual hourly rate, calculated the way the law requires it, often does not.
The Fair Work Agency is in its first year of operation. Its inspection pattern is establishing itself. The smart move, for a Devon employer in any of the exposed sectors, is to run a pre-assessment now, while there is still time to self-correct anything that the audit surfaces. A Fair Work Agency pre-assessment mirrors the same inspection areas an FWA officer would work through, produces a written gap analysis, and leaves you with a clear list of what to fix.
The cost of a pre-assessment is a fraction of a single civil penalty. The cost of a single Notice of Underpayment for a small employer regularly exceeds the cost of a year of structured compliance support. The numbers, in short, work in favour of getting ahead of the inspection rather than waiting for it.
This article is for general information only and reflects the law as it stood on the date of publication. It does not constitute legal advice and should not be relied upon as a substitute for advice specific to your situation. TestSafe Compliance provides audit and assessment services only. Where a specific legal question arises, seek advice from a qualified solicitor or employment law specialist.
From 1 April 2026 the National Living Wage for workers aged 21 and over is £12.71 per hour. The 18 to 20 rate rises to £10.18, the 16 to 17 rate and the apprentice rate both move to £7.55, and the daily accommodation offset is £10.66. These figures sit inside the National Minimum Wage Regulations 2015 and are enforced by the new Fair Work Agency, which took on consolidated powers on 7 April 2026. The rates apply to all employers in the UK regardless of size, sector or location, and they apply per pay reference period rather than averaged across the year.
No. Tips, gratuities, service charges and cover charges cannot be used to make up the minimum wage. Under the Employment (Allocation of Tips) Act 2023 and its 2024 code of practice, tips must be paid on top of wages in full to workers. If a tronc payment is the reason an employee appears to clear £12.71 an hour, the calculation fails. The contractual hourly rate paid through payroll has to meet the minimum on its own, before any tip allocation is added. This is one of the first areas a Fair Work Agency inspector checks in a hospitality business, and it is also one of the most common contractual errors we see in Devon restaurants and pubs.
Following the Supreme Court in Royal Mencap Society v Tomlinson-Blake (2021), only the hours a worker is awake for the purpose of working count towards National Minimum Wage. A flat sleep-in allowance for the night is lawful provided that, when the worker is woken to perform duties, those waking hours are paid at or above the minimum. Many Devon care providers still apply pre-2021 calculation methods. With the rate now at £12.71, even a small gap on each shift adds up to a significant arrears figure across a team. A working waking-time log is the single most important piece of evidence in a sleep-in audit.
You owe the arrears at the current rate, not the historic rate, and you owe them for up to six years. The Fair Work Agency can issue a Notice of Underpayment, charge a civil penalty of 200 percent of the underpayment up to £20,000 per worker, and name the employer publicly where total arrears exceed £500. Self-correcting before the FWA arrives, paying the arrears, fixing the calculation and documenting both, is treated far more favourably than waiting for an inspector to find it. The arithmetic almost always favours moving early, particularly once the cost of a public naming is factored in alongside the direct penalty.
Only if the deduction does not take the worker below National Minimum Wage in the pay reference period. A deduction for branded uniform, safety footwear, tools, training costs or breakages is unlawful at NMW level even where the employee has signed to agree it. The only deduction that is permitted to reduce pay below NMW is the daily accommodation offset, capped at £10.66 a day from April 2026, and only where accommodation is genuinely provided. Tax, National Insurance and pension contributions are treated separately and do not breach the rule. The signed agreement does not cure the breach.
Fixed price. Written record. Devon-based.