For the last in the current short series of pieces offering his perspective on and experiences of UK Employment Taxes and National Minimum Wage, Ian Thomas from People and Workforce at EY UK turns his spotlight to accommodation and the National Minimum Wage Regulations.
Anyone who’s been involved in a National Minimum Wage (“NMW”) investigation will know that most deductions made by an employer, or payments made by employees to their employer, have the effect of reducing pay for NMW purposes. One of the few exceptions is accommodation which is specifically allowed under the NMW Regulations.
To avoid abuse, the amount that can be deducted is limited to £8.70 per day. Any amount deducted in excess of £8.70 is treated as a deduction for NMW purposes and can have the effect of pulling employees paid close to NMW below the minimum rate allowed. All seems fairly straightforward and reasonable so far. Here’s where things get complicated…
Our client owns a number of residential properties that it lets out to third parties at a commercial rate. As a caring employer, our client offers the properties to employees at a discounted rent to that paid by third-party tenants. The rents are paid by the employees at arm’s length, typically via monthly direct debit in exactly the same way as third-party tenants.
However, because the amounts deducted exceed £8.70 (which equates to only £260 per month), employees find themselves paid below NMW despite the fact that they would struggle to find similar accommodation at the rates offered by their employer. The employer cannot afford to reduce the subsidy any further so the only solution is to remove the provision of the property to employees. In some extreme cases, this has resulted in the eviction of employees and the loss of their employment.
This was surely not the intention of parliament when drafting the legislation yet there does not seem to be much desire to change it to address anomalies like this. Some might say the Regs are too broad – is it time for a change?
Author: Ian Thomas
Ian is a partner in EY’s People Advisory Services team, specialising in UK Employment Taxes and National Minimum Wage. A former HMRC Inspector of Taxes and a member of the Chartered Institute of Tax, Ian has over 30 years’ experience advising clients on employment tax and NMW matters. He has supported numerous employers of all sizes with their HMRC investigations, negotiating significant reductions in settlements and saving his clients many £millions.
For the last in the current short series of pieces offering his perspective on and experiences of UK Employment Taxes and National Minimum Wage, Ian Thomas from People and Workforce at EY UK turns his spotlight to accommodation and the National Minimum Wage Regulations.
Anyone who’s been involved in a National Minimum Wage (“NMW”) investigation will know that most deductions made by an employer, or payments made by employees to their employer, have the effect of reducing pay for NMW purposes. One of the few exceptions is accommodation which is specifically allowed under the NMW Regulations.
To avoid abuse, the amount that can be deducted is limited to £8.70 per day. Any amount deducted in excess of £8.70 is treated as a deduction for NMW purposes and can have the effect of pulling employees paid close to NMW below the minimum rate allowed. All seems fairly straightforward and reasonable so far. Here’s where things get complicated…
Our client owns a number of residential properties that it lets out to third parties at a commercial rate. As a caring employer, our client offers the properties to employees at a discounted rent to that paid by third-party tenants. The rents are paid by the employees at arm’s length, typically via monthly direct debit in exactly the same way as third-party tenants.
However, because the amounts deducted exceed £8.70 (which equates to only £260 per month), employees find themselves paid below NMW despite the fact that they would struggle to find similar accommodation at the rates offered by their employer. The employer cannot afford to reduce the subsidy any further so the only solution is to remove the provision of the property to employees. In some extreme cases, this has resulted in the eviction of employees and the loss of their employment.
This was surely not the intention of parliament when drafting the legislation yet there does not seem to be much desire to change it to address anomalies like this. Some might say the Regs are too broad – is it time for a change?
Author: Ian Thomas
Ian is a partner in EY’s People Advisory Services team, specialising in UK Employment Taxes and National Minimum Wage. A former HMRC Inspector of Taxes and a member of the Chartered Institute of Tax, Ian has over 30 years’ experience advising clients on employment tax and NMW matters. He has supported numerous employers of all sizes with their HMRC investigations, negotiating significant reductions in settlements and saving his clients many £millions.