Salaried workers and salary sacrifice schemes: changing the National Minimum Wage rules
Our response largely focuses on the part of the consultation looking at salary sacrifice, given the interactions that exist with a worker’s income tax and National Insurance contributions (NIC) position. Ideally, the NMW Regulations would be rethought to allow those on the minimum wage to participate in salary sacrifice arrangements, given that salary sacrifice can only be used to gain a tax/NIC advantage in a limited number of circumstances and that the ‘risks’ to the low-paid of using salary sacrifice are probably overstated.
We also think that they should be rethought to allow people to enter into benign arrangements like Christmas Clubs, where they are not true salary sacrifice schemes but are simply deductions from net pay.
In terms of other NMW rules that penalise employers without protecting workers from detriment, we tell BEIS that the main one that springs to mind is around staff uniforms. If a worker has to pay for an item of ‘everyday’ unbranded clothing to wear as part of a uniform, such as a pair of black trousers, black shoes or a white shirt, the cost incurred must be deducted from their pay to establish whether at least the minimum wage is being paid.
We say it is probably counter-intuitive to employers that they need to essentially reimburse staff for such standard attire, which may well be worn outside the workplace and which the worker may have bought anyway for their own benefit.
We wonder whether, to make the situation a bit more balanced for both the employer and employee, the NMW position should be brought closer to the tax law approach (so that items of clothing could be recognized for minimum wage purposes, if they are branded or if the requirements to buy non-branded items are specific and excessive).
You can find our full response here: Salaried workers and salary sacrifice schemes: changing the National Minimum Wage rules – LITRG response