The National Living Wage rose to £12.71 per hour on 1 April 2026, a 4.1% increase for workers aged 21 and over. The Department for Business and Trade confirmed the new National Minimum Wage 2026 rates across all bands, and with the Fair Work Agency naming minimum wage enforcement as one of its opening priorities, the margin for error has narrowed.
For umbrella companies and recruitment agencies, the change was never simply a payroll update. Minimum wage compliance in the temporary labour market turns on deductions, and that is exactly where enforcement attention now sits.
What Are the New National Minimum Wage Rates?
Since 1 April 2026 the statutory hourly rates have been:
- National Living Wage (21 and over): £12.71, up 4.1%
- 18 to 20 rate: £10.85, up 8.5%
- 16 to 17 rate and apprentice rate: £8.00, up 6%
The accommodation offset rose to £11.10 per day at the same time. Charging more than that for provided accommodation can create a minimum wage underpayment even where the hourly rate looks compliant. The steeper rises for younger workers continue the move towards a single adult rate. Payroll should have been updated from the first pay reference period beginning on or after 1 April 2026, not from the date a worker was next paid.
Why Deductions Are the Real Risk
Most minimum wage breaches in the umbrella sector are not caused by a headline rate set too low. They happen when deductions pull a worker’s effective pay beneath the statutory floor.
A worker paid at or near the National Living Wage has almost no buffer. Deductions for items that count as reductions in minimum wage pay, or costs improperly passed to the worker, can create an underpayment even where the gross rate looks compliant. HMRC has identified deductions, salary sacrifice arrangements and unpaid working time as leading causes of underpayment. Common problem areas include:
- Charges for tools, uniforms or equipment required for the job
- Administration or margin deductions that reduce pay below the statutory rate
- Errors in how holiday pay is calculated and shown
- Travel time, training or time on tasks before a shift starts not treated as working time
- Misallocation of hours across pay reference periods
HMRC’s naming scheme has repeatedly listed employers who breached the rules through deductions rather than a low headline rate. In March 2026 alone, over 385 employers were named and ordered to repay more than £7.3 million to around 60,000 workers, alongside £12.6 million in penalties. Penalties reach £20,000 per underpaid worker or 200% of the underpayment, whichever is greater, with a look-back period of up to six years. Transparency on the payslip is a compliance control, not an administrative nicety.
How the Fair Work Agency Changes Enforcement
The Fair Work Agency, operational since 7 April 2026, consolidates HMRC’s NMW enforcement team, the Employment Agency Standards Inspectorate and the Gangmasters and Labour Abuse Authority under a single body, and has named National Minimum Wage enforcement as an opening priority.
Umbrella regulation is expected separately, but minimum wage enforcement did not wait for it. Businesses that assume scrutiny only arrives with a new regulatory framework are misreading the sequence. The enforcement capability is already here.
What Agencies Should Check Now
Recruitment agencies carry exposure even where an umbrella company runs the payroll. With joint and several liability for PAYE live since April 2026, the agency that cannot evidence how its supply chain pays workers is carrying avoidable risk. Confirm that every umbrella partner:
- Applies the correct rate for each worker’s age band.
- Produces a clear, itemised payslip showing gross pay, all deductions and the resulting rate.
- Calculates holiday pay correctly and does not use it to disguise an underpayment.
FCSA’s Position
Paying the minimum wage is the floor, not the achievement. The compliance question is whether workers actually receive it after every deduction, in every pay reference period, on a payslip they can understand. That is where enforcement lands and where non-compliant operators come unstuck.
FCSA Accreditation requires Members to demonstrate transparent, lawful deductions and correct minimum wage treatment as part of the assessment standard. For agencies and end clients, engaging an FCSA Accredited Member is the practical way to keep minimum wage compliance defensible under the Fair Work Agency’s enforcement. You can verify a provider’s accreditation on the FCSA Members register.
