National Minimum Wage: Consultation

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National Minimum Wage: Consultation

Published 14 January 2019

The facts

Salaried workers: legislation provides a set of rules about how compliance with the National Minimum Wage is calculated for workers who perform salaried hours work i.e. those who are paid an annual salary in equal weekly or monthly instalments, for an annual number of hours. The consultation seeks views on whether:

  • there should be a set uniform calculation year rather than the current rule where the calculation year relates to the worker's start date and is therefore different for all workers?
  • over time and shift premium should count towards the NMW reversing the current position?
  • the current rule that salaried workers must be paid in equal weekly/monthly instalments should be extended to allow other payment cycles to reflect business practices for example fortnightly or four weekly?
  • there are any NMW rules which penalise employers without protecting workers from detriment?

Salary Sacrifice Schemes: These schemes operate by the worker and employer agreeing a lower rate of gross pay in exchange for non-cash benefits (such as childcare vouchers), goods or services or in connection with pension contributions made by the worker. HMRC operate on the basis that the NMW rules restrict employers from agreeing a lower rate of gross pay than the NMW or by making certain types of deductions from their workers’ pay that take the worker's pay below the minimum wage. Some employers are forced to refuse to allow these salary sacrifice schemes to avoid non-compliance with these rules, and underpayment of the NMW. These workers may therefore be comparatively worse off than higher paid workers. The consultation seeks views on the practical operation of these rules and whether they present a risk rather than benefit to lower paid workers, presumably so that HMRC can consider changing the rules.

What this means for employers

The consultation document is here. Employers who wish to contribute should note that the consultation closes on 1 March 2019.

The purpose of the NMW is to protect workers. However, the rules are complex and difficult to administer with some employers reporting that the rules prevent them from being able to establish attractive pay premium arrangements, and exclude low paid workers from some salary sacrifice benefits. Given the escalation of NMW enforcement over the past couple of years, the large penalties for employers due to technical breaches of the legislation, and public naming of non-compliant employers, this consultation may be seen as an attempt by the Government to redress the balance.

Authors

Ceri Fuller

Ceri Fuller

London - Walbrook

+44 (0)20 7894 6583

Zoë Wigan

Zoë Wigan

London - Walbrook

+44 (0)20 7894 6564

Key Contacts

Ceri Fuller

Ceri Fuller

London - Walbrook

+44 (0)20 7894 6583

Zoë Wigan

Zoë Wigan

London - Walbrook

+44 (0)20 7894 6564

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