Salary sacrifice and national living wage

zagfles

Your employer should allow you to make employee contributions to the works pension, either via "net pay", where taxable pay is reduced but not contractual/NI'able pay, or by "relief at source", where the pension provider claims basic rate relief. Contributing in either of these ways does not reduce your pay as assessed for NMW purposes.

MDMD

Malthusian said:

We've seen people run into trouble by causing their employer to break minimum wage law, as a result of which the employer cancels the salary sacrifice arrangement and refuses to offer it again.

If your wife sal sacs down to minimum wage based on her normal hours of work and then works through a lunch break, she will inadvertently have caused her employer to commit a criminal offence. Unpaid overtime counts in the minimum wage calculation.

I get the theory of this but how is an employer meant to police whether people do unpaid overtime?

For example in October and November I was doing c60 hour weeks but we don’t record our hours so my payroll would be unaware of this, yet I was using SS down to minimum wage which would make my hourly rate well below NMW.

Nmwspecialist

NMW compliance is complex and dependent in a number of factors.
if you are considered to be a salaried worker (by NMW definition) and enter in to a salary sacrifice agreement, the employer must undertake a NMW calculation each pay period using your contracted hours. Actual working hours are still required throughout the year in order to perform a final ‘balance’ check at the workers individual year end date, to check for annual NMW compliance.
However ….
If you are considered to be an unmeasured or time worker (by NMW definition) and enter in to a salary sacrifice agreement, the employer must undertake a NMW calculation each pay period using your actual working hours ( no further annual check required).
What counts as working time? A small example of Unpaid overtime-
working through unpaid breaks, checking/responding to works emails out of hours,
undertaking online training out of hours
and even the time taken to dress/undress into PPE clothing, 
I have even seen instances of HMRC count some social events as working time, due to the fact the employer insisted everyone MUST attend! 

MX5huggy

Has an employer ever been prosecuted, or other penalty imposed where SS pension contributions have reduced pay below NMW only because the employee has carried out unpaid over time. I think of teachers who do hours of after hours marking and prep, or architects putting in hours because they live the job?   

jamesd

Wellgood said:

Does anyone know if you should look at taxable pay as per P60 or is it net pay (after tax) that needs to be higher then the NMW
i.e. do you need to receive 8.91 per hour after tax or before tax?

Not P60 pay. because that's annual. It's gross pay after sacrifice for each pay period, normally monthly.

Malthusian

MX5huggy said:

Has an employer ever been prosecuted, or other penalty imposed where SS pension contributions have reduced pay below NMW only because the employee has carried out unpaid over time. I think of teachers who do hours of after hours marking and prep, or architects putting in hours because they live the job?   

"You might get away with it" is bad advice.

Teachers have a generous DB pension scheme and I doubt many teachers use salary sacrifice, especially to anywhere near minimum wage.

"They really love the job" is not a defence to breaking minimum wage law, regardless of whether you're an architect or a sewage technician.

If an employer inadvertently broke minimum wage law because their employee was inefficient and working excessive hours without their knowledge, maybe they'd get away with it. But for the purposes of this thread, they would certainly cancel or severely restrict the salary sacrifice arrangement once they found out. So it would be a much better idea to leave a margin for error so that the issue cannot arise.

It would be an exaggeration to suggest that an employer might cancel your salary sacrifice because they saw you working while eating a sandwich, but as this thread illustrates, there are times when your hours can jump dramatically for an extended period because it's "part of the job". If you are paid a good salary (the reason you're willing to work long hours without overtime pay in the first place) and your hourly wage is nowhere near national minimum wage even if your hours go up, that's not a problem. If you've tried to be too greedy with salary sacrifice then it is.

The problem is not that HMRC are going to swoop in on your employer thinking that you need to be rescued from your indentured servitude, the problem is that employers are rightly paranoid about getting in trouble with HMRC, and if they realise that you have led them into breaking minimum wage they will cancel your salary sacrifice and not let you do it again. "How would HMRC find out" is the wrong question. "How would my employer find out" is the correct question and the answer is "Pretty easily".

Thrugelmir

Malthusian said:

MX5huggy said:

Has an employer ever been prosecuted, or other penalty imposed where SS pension contributions have reduced pay below NMW only because the employee has carried out unpaid over time. I think of teachers who do hours of after hours marking and prep, or architects putting in hours because they live the job?   

 the problem is that employers are rightly paranoid about getting in trouble with HMRC,

Employers won't get paranoid. Simply won't offer anything which places a onerous burden on the organisation. SS isn't a right. 

Nmwspecialist

Regarding the query on how HMRC would ‘find out’ and investigate risks and  breaches….
HMRC’s NMW enforcement team respond to 100% of NMW complaints (via ACAS) these can be calls to helpline or an anonymously  via the online complaints form. They also carry out targeted enforcements based on intel and risk assessments.
The salary sacrifice risk (including pension) is currently in HMRC’s spotlight with many businesses unintentionally being caught out.