The new rates are available here.
Whilst many employers are aware they need to pay at or above these rates, there are some interactions with Pension Salary Sacrifice (and any salary sacrifice in general). These need careful consideration to ensure that pay rates are sufficient to allow participation in a scheme to avoid an inadvertent breach of NMW.
The interaction between Pension Salary Sacrifice and NMW
Pension Salary Sacrifice is a great way to:
It is an arrangement used widely by both large and small employers and there is HMRC guidance too on this arrangement. We help many organisations navigate the tax, NIC, payroll, NMW and broader HR interactions and considerations.
However, many salary sacrifice arrangements were implemented at a time when the rates of NMW were much lower, so for those who have previously implemented Pension Salary Sacrifice, now is a good time to review NMW compliance.
Historically, when many Pension Salary Sacrifice arrangements were put in place, a threshold limit for eligibility may have been put in place to ensure those close to or at NMW after any salary sacrifice would not be able to participate. However, given the increases in NMW over the last five years, an employee participating in a salary sacrifice arrangement may now breach national minimum wage and rules, if previously implemented thresholds have not been reviewed and updated. NMW compliance is much broader than this though. There are a number of other factors to consider, such as how work-related expenses (e.g. uniform items) are dealt with, and how training time and worker category are taken into account for NMW purposes.
Next steps and support available
We have not only been helping clients implement Pension Salary Sacrifice, but we are also able to assist with reviewing whether previously designed Pension Salary Sacrifice arrangements are still NMW compliant.
This support can help mitigate future risks for the business, especially at a time when HMRC are increasing their compliance activity across all business sectors. We can also help you reassess your businesses’ wider reward strategy for all staff.
Please contact Ian Goodwin, Jane Gilmore, Nabeel Thakur or Ian Prescott should you want to discuss this further.
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