Salary sacrifice & NMW

Additional Leave & National Minimum Wage

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This could be the first anonymous post I've done!

My wife has salary sacrificed for some extra leave for years and is also now on NMW.  It is my opinion that salary sacrifice cannot be done if it puts you below NMW for anything except acommodation.  Her work (a local firm of accountants) disputes this.  I know it's not an accounting question but does anyone have any experience in this?    

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RLI
By lionofludesch
22nd Jul 2020 15:15

I vote you're right.

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By Paul Crowley
22nd Jul 2020 15:32

PTP And BDO had a webinar today, 12pm on NMW.
Your issue not mentioned, but HMRC getting very aggresive about deductions, even fictional deductions.
All deductions for whatever reason get taken into account.

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By Sandnickel
22nd Jul 2020 16:49

Isn't the whole thing illegal? Your wife is effectively paying the company to have a day off (rather than unpaid leave)?

To answer the original question though, yes you're absolutely correct.

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Replying to Sandnickel:
RLI
By lionofludesch
22nd Jul 2020 16:59

Quote:

Isn't the whole thing illegal? Your wife is effectively paying the company to have a day off (rather than unpaid leave)?

Well, it should be presented as a contract package.

Employee is prepared to accept a lower wage for the benefit of extra holiday pay.

Unfortunately, that lower wage cannot fall below the statutory minimum.

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By Hugo Fair
22nd Jul 2020 16:51

The very first paragraph at https://www.gov.uk/guidance/salary-sacrifice-and-the-effects-on-paye states:
"A salary sacrifice arrangement must not reduce an employee’s cash earnings below the NMW rates. Employers must put procedures in place to cap salary sacrifice deduction and ensure NMW rates are maintained."

This should hardly be a surprise since Salary Sacrifice is not a deduction from wages (as it is commonly thought of) but a contractual reduction in salary!

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