In early 2019 the Department for Business, Energy and Industrial Strategy (BEIS) launched a National Minimum Wage consultation on salaried workers and salary sacrifice schemes. The response has now been published.

The consultation sought views on:

  • Proposed changes to the National Minimum Wage (NMW) Regulations relating specifically to salaried hours work and where employers feel NMW rules unfairly penalise them without generating any benefit or protection for workers.
  • The practical operation of salary sacrifice schemes.

Almost a year after the consultation closed, the government has now released its response. They plan to make three amendments to the NMW rules relating to salaried hours workers to allow:

  • Salaried hours workers to be paid in additional equal instalments, e.g. fortnightly or four-weekly.
  • Employers to have the discretion to specify a calculation year for their workers. This will be easier for employers. Currently, workers fall into different years depending on when they started employment.
  • Employers to be able to make premium payments to salaried hours workers in respect of basic hours and to allow salaried hours workers’ contracts to specify these premium payment arrangements.
    • These payments will not form part of the workers’ remuneration for calculating NMW pay.

The report notes there is evidence that salary sacrifice and pay deduction arrangements are being withdrawn by employers due to concerns they will lead to non-compliance with the NMW rules. The benefits withdrawn included childcare, pension benefits and travel-related schemes.

There is no intention to amend the rules to deal with this, instead, the government will implement a range of non-legislative measures to help employers better understand and comply with the rules by:

  • Improving NMW guidance on GOV.UK and providing a helpline for employers operating deduction or salary sacrifice schemes.
  • Waiving financial penalties for employers for certain breaches of rules relating to salary sacrifice and pay deductions.
  • Resuming the NMW Naming Scheme, naming employers more frequently but with most employers only included where HMRC arrears exceed £500. This has already begun.
  • Proactively supporting new, small businesses including HMRC visiting selected new, small businesses to educate them on the NMW.

Links to our guides:

Salary sacrifice and options remuneration schemes (subscriber)
A salary sacrifice scheme is an arrangement made between employer and employee. The employee forgoes cash earnings in return for benefits or other forms of non-cash pay.

National Minimum Wage rates and allowances

Directors & the NMW (subscriber)
All employees are subject to the National Living Wage (NLW) or, if under 25, to the National Minimum Wage (NMW).

External link:

'Salaried hours work and salary sacrifice consultation: Government response'