Paid less than minimum wage after salary sacrifice.

6022tivo

I'm heavily topping up my pension via salary sacrifice and currently pay no tax.

I have been recalculating and have realised I am being technically paid under the minimum wage by about £90 a month.

Based on what I have read, it is the company that are wrong here, and if they knew they would reduce my salary sacrifice to make them compliant.

Other threads I have been reading say months/years after they realise, they pay you a taxable lump sum to bring them back in compliance and either ask for it back, or write it off.


Obviously I want to keep my sacrifice as it is, so do I just keep quiet and if I leave the company in a year or so, I bring them to task?

What would you do here??

BoGoF

Prob posted in wrong board but I would say tell your employer.

If HMRC did an employer compliance check they would be named and shamed.

xylophone

Obviously I want to keep my sacrifice as it is, so do I just keep quiet and if I leave the company in a year or so, I bring them to task?

You've realised the error so advise the company.

6022tivo

It's not my error.
The company I work for are horrible.
The HR Department is terrible and going through major changes.

I don't really want to as they will blame me.

I will be worse off if I do.

I'm not the one in the wrong.

BoGoF

So why bother asking the question?

Alexland

I would at least reduce your contribution going forward so that the employer is compliant and you are good across the tax year. If the company get into trouble then as a corrective action they might set arbitrary limits on how much workers can salary sacrifice in future (such as no more than 20%) which might be to your disadvantage if you wanted to contribute more. Worse still they might even conclude that salary sacrifice is too hard to administer...

6022tivo

It's a good point I suppose.

We have just got a new HR Director and are in the process of a New HR IT solution. It is a listed company with a £400m+ turnover and about 400 workers.
I'm surprised they have not realised and I'm sure they will correct it shortly.

bowlhead99

6022tivo wrote: »

Based on what I have read, it is the company that are wrong here, and if they knew they would reduce my salary sacrifice to make them compliant.

Ignoring the possibility that you have done the calculations wrong...

If you're getting paid less than NMW, you're right that it's your employer that's in the wrong as the burden isn't on you to know NMW rates and employment law inside out.

So yes they (rather than you) are 'in the wrong' and you won't get into trouble yourself, but given you deliberately asked them to pay you a low salary for your own overall advantage, they are hardly being bad guys and doing wrong by you by going along with your request having miscalculated what they can pay you.

Obviously I want to keep my sacrifice as it is, so do I just keep quiet

As there aren't really any negative consequences for you personally to just keep taking your current rate of pay and pension, the easy option is certainly to just keep quiet. Though it depends on your moral compass given you know you shouldn't be allowed to do it and they would stop it if they were aware.

It's like if a cashier gives you too much change and you think, "well, if they only want to charge me that much for these items, that suits me, I won't say anything, there's no practical consequence for me just walking off with all this change". The big picture is the fact that the poor cashier may get into trouble with someone if the till doesn't balance or the store manager will get in trouble with the owner if revenue is lower than would be implied by the amount of stock sold.

So, likewise the HR staff may get onto trouble with the company, or the company may get in trouble with the enforcers of the regulations they broke, by giving you too little pay and too much pension, allowing you to dodge tax and NI and have the consequence fall on the company. So it depends on whether you care about that stuff.

and if I leave the company in a year or so, I bring them to task?

Saying nothing now while it's to your personal advantage and then 'bringing them to task' after you left sounds like the ultimate !!!!move. (expletive auto-deleted)

Are you suggesting you continue to take all the money tax efficiently into your pension as you specifically requested, dodging tax and NI, and then later after you've stopped working for them, go back and complain to the company that they failed to pay you at least the minimum wage and demand that they are 'brought to task' by paying you a balancing payment to get you up to the minimum level?

I guess some people might try that and see if it flies, but it you do, I hope you never try and claim the moral high ground for anything else in life.

What would you do here??

Depending on my character, I would either keep quiet and hope/assume it would never get noticed and never have adverse consequence for anything anyone... Or I would tell them now to correct the error.

What I wouldn't do is keep quiet now to pocket maximum pension and save tax an NI, then leave, then complain that they should be brought to task. That behaviour sounds abhorrent and as an employer I would be really annoyed by an employee who acted so two-faced, and would try to screw him in some other way.

Alexland wrote: »

I would at least reduce your contribution going forward so that the employer is compliant and you are good across the tax year. If the company get into trouble then as a corrective action they might set arbitrary limits on how much workers can salary sacrifice in future (such as no more than 20%) which might be to your disadvantage if you wanted to contribute more. Worse still they might even conclude that salary sacrifice is too hard to administer...[/QUOTE

My employer set an arbitrary limit of 10%, not because of making past mistakes but just to make them less likely to happen. So if you help them break the rules and then later try to get them into trouble because you don't like the company, the chances are they will do something going forward to avoid such errors which might make the benefits worse for all their hundreds of workers in the future

Paul_DNAP

If the HR are in such a mess, can you not just have a quiet word with payroll - e.g. "can you just double check my workings here, I think I've gone a bit far on the salary sacrifice?" and see what they do with the info.

6022tivo

The above I read with interest.

Dodging tax and NI sounds like it's a bad thing. It's not is it, I'm building up a pot so I don't have to rely on the state in later life to look after me. It's the whole idea of salary sacrifice isn't it?

I've been here 10 years, they are becoming a ruthless company to work for, sacking and firing at the moment, and redundancies. The bankers have moved into the board and don't care, so my moral compass is not really too bothered about the company.

I did not picked a figure to get them into trouble. My maths may be wrong. I'll come to that in a minute.

£924 a month is what I get paid.
I work 28 hours a week.

My maths is Annual - £924 x 12 = £11088
Hours 28 x 52 = 1456

11088/1456 = £7.62



Alternatively National Wage is £8.21
So £8.21 x 28 x 52 = £11953 Should be my annual Wage, not the current £11088


These are rough maths, I'm not taking into consideration my 9 bank holidays and 20 days annual leave so not sure how this can make a difference? However I don't think it should?

quirkydeptless

6022tivo wrote: »

Dodging tax and NI sounds like it's a bad thing. It's not is it, I'm building up a pot so I don't have to rely on the state in later life to look after me. It's the whole idea of salary sacrifice isn't it?

I agree it's not tax dodging.

It's tax relief to encourage people to invest in their own future.

I'd salary swap down to minimum wage and put the rest of my allowance in to a SIPP every year I could afford to do so.

I would also comply with all allowances and limits.