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National minimum wage: BEIS launches consultation on salaried hours work and salary sacrifice schemes

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In the week before Christmas, the Department for Business, Energy and Industrial Strategy (BEIS) launched a consultation on the National Minimum Wage (NMW) rules regarding salaried workers and the operation of salary sacrifice schemes.  In a letter sent to the British Retail Consortium, business secretary Greg Clark promised to review NMW rules that “unnecessarily burden and penalise” employers after technical breaches have landed several large retailers in trouble.  Industry leaders have said it is “essential” that the rules are updated to reflect modern work practices.

In the consultation, BEIS acknowledges feedback from employers that some of the conditions required to classify work as salaried hours work are “complex, restrictive and make compliance with the legislation difficult”.  This is particularly so for employers in the hospitality and retail sectors, who have reported that the two permissible pay cycles (weekly or monthly) do not reflect common business practice (as staff are often paid fortnightly or four-weekly in those sectors).  BEIS also notes the complexity of the “calculation year” definition, together with the exclusion of overtime pay and other premia from remuneration, can make it difficult for companies to offer attractive pay packages.

The interplay between NMW rules and salary sacrifice schemes has been in the press this week, with news that supermarket chain Iceland may face a bill for £21 million of underpaid wages, because a staff Christmas savings scheme took workers’ pay below NMW limits.  According to the consultation, some employers have reported withdrawing salary sacrifice schemes from workers on low pay to avoid breaching the NMW regulations.

Employers are advised to make sure they are fully aware of their obligations under the NMW regulations and, in particular, the rules around deductions from wages that could take workers’ pay below the allowable limits.  As an HMRC spokesperson said: “The rules … have been put in place to protect workers. The money that workers receive in their pay packets must be at least the national minimum wage with no exceptions.

Not only does the consultation act as a reminder to employers of the NMW rules, but is also an opportunity for employers to express their views.  We would encourage employers to contribute to the consultation before it closes at 11.45pm on 1 March 2019.

Click here for the consultation in full:

BEIS consultation, National minimum wage: consultation on salaried workers and salary sacrifice schemes (17 December 2018)