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Balancing salary sacrifice with the national minimum wage: Naming and shaming scheme under review

Balancing salary sacrifice with the national minimum wage: Naming and shaming scheme under review

Posted on 9 July 2019

The government recently announced that its 'Naming and Shaming' scheme in relation to the National Minimum Wage (NMW) is under review.

The scheme was broadly introduced to help employers better understand their obligations in paying employees the NMW. However, in practice, commentators have strongly indicated that the scheme has resulted in the government unfairly penalising certain employers who, as a result of providing certain non-cash benefits to employees, are alleged to have technically paid their workers less than the NMW.

We act in one of the largest cases in this area on behalf of Iceland Stores as an employer.

In a recent Employment Tribunal case involving Middlesbrough Football Club, the issue in question was whether the club's deduction of salary for football season tickets caused employees' pay to fall below the NMW. It was broadly held that whilst HMRC viewed this to be a technical breach, it was not a breach in practice.

There are of course many ways in which employers can better structure their employee benefit arrangements so as to ensure they do not fall foul of NMW rules. This is particularly important for employers given the very harsh financial consequences, including penalties of up to 200% of any underpayment (which can apply to the previous six years in some cases). Employers also risk criminal sanctions if HMRC suspect fraudulent behaviour. We discussed this topic more broadly in an earlier edition of Tax Aware.

There is a balancing exercise to be undertaken in penalising technical breaches in the same way as penalising intentional underpayments. Based on HMRC's objectives, the 'naming and shaming' scheme was presumably not intended to be used as a tool to discredit well-intentioned employers unintentionally committing only a technical breach of legislation.

The review is ongoing and it is understood that the results should be published soon, not least due to the amount of employers this applies to.

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