Real living wage to rise to at least £12 an hour – here's what you need to know

baldoldman

Hi, just wondering if anyone else has come across this problem, my employer signs up for the real living wage. I now get £12 per hour working a forty hour week, salary sacrifice at 5.5% towards my pension. Employer realises this means they no longer pay me the real living wage which they say is illegal and, ask me to reduce or change my pension contribution which reduces my pension pot.

geordiejon

Your employer is allowed to make some deductions that could leave you with less than the National Minimum Wage or National Living Wage in your take-home pay. This includes:

• tax and National Insurance contributions
• paying back an advance or overpayment
• pension contributions
• trade union fees
• a charge for accommodation provided by your employer

Grumpy_chap

geordiejon said:

Your employer is allowed to make some deductions that could leave you with less than the National Minimum Wage or National Living Wage in your take-home pay. This includes:

• tax and National Insurance contributions
• paying back an advance or overpayment
• pension contributions
• trade union fees
• a charge for accommodation provided by your employer

NMW is a gross pay level, so tax and NI deductions will always reduce the take home pay below NMW if that was the starting point.

In the case of @baldoldman the pension contributions are via Salary Sacrifice, which is treated as reducing the gross salary and gross salary cannot be reduced below NMW.  Though the threshold is higher here as the employer is signed up to "Real Living Wage" and probably use that in their marketing.  The SS pension means that the individual is not at RLW.
Paying below NMW is illegal.
Paying below RLW is legal, however would mean that the employer cannot claim to be a "Real Living Wage Employer".
The change does not mean that the individual's pension is reduced as personal pension contributions can be made from nett pay after payroll processing.  If the employment-linked scheme does not allow these contributions, a separate personal pension is possible.  Making pension contributions this way rather than via SS is less tax efficient.