The Low Incomes Tax Reform Group (LITRG) observe that some employers are using travel expenses to top up wage payments for the purposes of the National Minimum Wage (NMW). This practice is incorrect; not only is it unfair on workers it is capable of challenge by HMRC.

Since January 2011 the NMW regulations state that when an employer reimburses travel or subsistence expenses incurred by an employee the amount payable as ordinary wages must be equal to or exceed the NMW for the hours worked. Amounts reimbursed for travel or subsistence may then be reimbursed separately; the payments cannot be counted in calculating the NMW. 

LITRG says that it has seen evidence of malpractice on payslips. Often due to the complexity of the PAYE deduction process and an employer's expenses reimbursement system many lower paid workers don't question their payroll deductions.

It seems to be an issue with employment agencies who use overarching contracts and umbrella schemes, but also as was seen in the 2011 case of  Reed Employment PLC (and other Reed companies) v HMRC, some employers have used PAYE dispensations to enhance their own tax relief, see Pay Day Relief Models

Low Income Tax Reform Group: