21-02-2020

The Department for Business, Energy and Industrial Strategy (BEIS) earlier this month, updated their guidance in relation to the enforcement of National Minimum Wage Law.

The updated guidance states how employers will not have financial penalties applied where certain conditions are met, in situations where the National Minimum Wage (NMW) has not been paid due to a reduction in pay resulting from a salary sacrifice arrangement.

The position on NMW and salary sacrifice remains unchanged, a salary sacrifice arrangement must not be allowed, if it were to reduce an employee’s cash earnings below the NMW.

The revised guidance relates to associated penalties that would not be issued where the following conditions are met:

1.) The whole amount of the underpayment in the reference period needs to be attributable to a salary sacrifice scheme, or a purchase from the employer which is not for items required for the employee to undertake their work (e.g. uniform), or a savings scheme operated by the employer for the benefit of the employee

2.) No part of the underpayment when it relates to condition one relates to deductions as respects a worker’s expenditure or as respects living accommodation

3.) The worker has consented to the reduction or deduction

4.) The worker has received the relevant goods or benefits, or repayment of monies into the saving scheme in full compliance with the terms and conditions

5.) Employers that have been convicted of NMW offences, been party to a labour market enforcement undertaking or order, or who have been issued a Notice of Underpayment (NoU) in the past six years will still receive penalties

The Department for Business Energy and Industrial Strategy (BEIS) who control and determine the NMW legislation, have confirmed the reasoning behind the decision to remove financial penalties relating to the scenarios where this does happen, BEIS stated that employers will still need to pay employees for any underpayment of NMW, but the removal of the associated financial penalties would provide employers with an opportunity to reassess their practices and ensure that they are compliant with NMW law.


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