Government responds to consultation on salaried hours work and salary sacrifice schemes


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The government has responded to the consultation on salaried hours work and salary sacrifice.  It will amend National Minimum Wage (NMW) legislation to make it easier for employers to rely on the provisions for salaried hours work (changes are due to come into force on 6 April), but has said that no changes will be made to the rules relating to salary sacrifice schemes.

Salaried hours work

The amended NMW regulations will allow salaried hours workers to be paid in additional equal instalments, such as fortnightly or weekly.  This will provide employers with additional flexibility in relation to the frequency with which they can make equal payments to salaried workers.

The amended regulations will also enable employers to choose a calculation year for their workers (currently salaried hours workers have their NMW entitlement calculated according to the average monthly hours worked in the "calculation year" which is identified by taking into account the start date of the worker's employment, whether they are paid weekly or monthly, and, if monthly, whether they commenced employment on the first day of the month).  By enabling employers to specify a calculation year, and even to specify different calculation years for different workers, the government hopes that employers and workers will be able to monitor the basic hours worked more easily. 

Where a calculation year is not specified by the employer then the current provision will remain the default.

The amended regulations will deal with pay premia, amending the current regulations to ensure that salaried hours workers can received enhanced rates of pay, or additional pay for their basic hours, without falling outside salaried hours work.

Salary sacrifice

The government will not be amending the NMW legislation relating to salary sacrifice and deductions (generally only contractual pay will count as remuneration for the purposes of calculating remuneration under the NMW legislation; where a portion of salary is sacrificed in exchange for a benefit it will not count for NMW purposes).  However, it will be issuing improved guidance, and will waive financial penalties for employers for certain breaches of rules relating to salary sacrifice.

A new package of support (from HMRC) will be put together to help employers understand the effect of deductions on NMW.

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