As part of the October 2024 Employer Bulletin, the HMRC has reminded employers of the impacts that salary sacrifice (salary exchange, smart schemes, flex benefits) have in relation to National MinimumWage regulations.
Being compliant with minimum wage law is not about the starting rate of pay, but about the rate received across all working hours whether paid or not. Salary sacrifices are complex contractual arrangements with many not understanding their legal construction. They are not salary deductions.
PAYadvice.UK offer resources on Salary Sacrifice and Optional Remuneration arrangements.
From the October 2024 employer bulletin
..It does not matter how many workers you employ, you must pay the correct minimum wage rates..
The National Minimum Wage is the lowest rate of pay per hour that most workers must be paid by law. The National Minimum Wage rules also apply to the rate referred to as the National Living Wage. It does not matter how many workers you employ, you must pay the correct minimum wage rates. Salary sacrifice schemes are one of the common causes of National Minimum Wage underpayments.
..Salary sacrifice schemes are one of the common causes of National Minimum Wage underpayments..
From 28th October 2024, HMRC will be presenting a series of live webinars to help employers understand how salary sacrifice schemes affect the National Minimum Wage. A salary sacrifice is a general term used to describe an arrangement where a worker gives up their contractual entitlement to a portion of their salary, in exchange for some form of benefit.
Register to attend a webinar for help getting National Minimum Wage right. There will also be an opportunity to ask questions [of the HMRC] … National Minimum Wage experts.
..If the reduced contractual pay takes workers rates below National Minimum Wage rates, your workers will be underpaid..
If the reduced contractual pay takes workers rates below National Minimum Wage rates, your workers will be underpaid. Employers must ensure that salary sacrifice arrangements do not take their workers’ pay below the National Minimum Wage.
For deductions that are not salary sacrifices, meaning there is no contractual change to workers’ pay, then the usual National Minimum Wage deduction rules apply instead. For example, if the employer has own use and benefit.
If you operate salary sacrifice schemes, you need to check the new reduced pay does not take workers’ pay below National Minimum Wage for all time worked in every pay reference period
Want to know more?
The following resources provide further information on the Employer Bulletin, Salary Sacrifice arrangements and National Minimum Wage, these resources link to both articles and guides from PAYadvice and provide links to official sources:
PAYadvice.UK 19/10/2024 updated