National Minimum Wage - what should your latest considerations be?

October 2021

Kyle is a Senior Manager specialising in leading the provision of our National Minimum Wage services across the North.

On Tuesday 5 October 2021, I represented BDO at a Department for Business, Energy and Industrial Strategy (BEIS) and HMRC key stakeholder forum with professional advisors on the National Minimum Wage (NMW).

The forum is designed to:

  • Encourage healthy debate on the enforcement of NMW
  • Discuss what additional support employers may need with compliance
  • BEIS/HMRC to update stakeholders on future policy direction or enforcement activity

I’ve detailed below HMRC’s update on common reasons for underpayment and the policy reminders from BEIS communicated during the forum.

It is becoming clear that in HMRC’s opinion some of the more common deductions/payments typically reduce a worker’s pay for NMW purposes in most cases. Their view is that there are limited circumstances where the deduction or payment could be ignored for NMW purposes. Therefore, if a worker is paid close to the NMW hourly rate of pay, HMRC are of the opinion that an underpayment of NMW will arise.

So what should you check based on HMRC’s latest position?

  • If you have treated workers as unmeasured for NMW purposes, the change in legislation in respect of salaried workers which came in from 6 April 2020 may mean you need to implement changes before the end of the 2-year transition period so by April 2022.
  • Check workers’ pay if you have an Xmas savings scheme, other forms of saving scheme, or take any deduction from a worker’s pay (which sits in a company bank account or reduces the costs you incur).
  • Check workers’ pay if you provide living accommodation to an employee and they pay rent which is greater than £58.52 per week.
  • Check worker’s pay if they work overtime but instead of being paid for this they take TOIL in another pay period.
  • Even if you have already been subject to an HMRC NMW review, you still need to continually assess your control processes to ensure compliance with NMW legislation. HMRC are re-visiting employers who have been subject to a NMW enquiry and there have been examples of employers being named and shamed for a second time.

Key reminders from BEIS for employers to consider following recent changes in NMW legislation

  • From 1 April 2021 employers are required to keep records to demonstrate they have paid all workers NMW for a period of 6 years. This was previously 3 years.
  • From 1 April 2021 the National Living Wage rate was extended to cover all individuals aged 23 or older. This previously applied to workers aged 25 or over.
  • The definition of a salaried worker changed from 6 April 2020. HMRC are of the opinion that workers previously categorised as unmeasured such fortnightly or 4 weekly paid workers, or those receiving premium pay such as unsocial working arrangements will meet the new salaried worker criteria. Employers have until April 2022 to implement changes to comply with this change.
  • The government will introduce legislation to ensure that all tips are passed to workers, but employers should remember that any tips or gratuities a worker receives are ignored for NMW purposes.

HMRC update on common reasons for underpayment

1. Treatment of savings scheme e.g. Christmas

HMRC conveyed that during an NMW enquiry compliance officers will focus on the control of the funds. Where an employer has any form of control, the HMRC view is that the amount taken from the worker reduces their pay for NMW purposes. 

The key example discussed by HMRC related to Christmas savings clubs. HMRC quoted their own guidance which reinforces their current position:

“Payments by a worker into savings schemes such as Christmas clubs where the money is held by the employer reduce the worker’s pay for minimum wage purposes, unless the money is clearly held in trust so that it belongs to the worker.”

2. Accommodation

HMRC also conveyed that where a worker pays rent to their employer which exceeds the accommodation offset amount, currently £58.52 per week, this will reduce the workers’ pay for NMW regardless of how it is paid. So this would also apply to payments taken outside of payroll.

HMRC acknowledged there is a limited exemption which could apply in some circumstances.  


Finally, HMRC indicated their view that ‘time off in lieu’ is not a feature in the NMW legislation. If TOIL is taken in a different pay period to the additional time worked this would need to be considered for NMW purposes.

HMRC also confirmed this may apply to “flexi” or “flexible time” working arrangements depending on the facts of the arrangement in place.  

For more information on any National Minimum wage queries please visit the BDO website or contact me directly at [email protected]


Read more Yorkshire and North East business insights

Read more



Register for upcoming online events.


Meet the team

Speak to local experts in Leeds.

BDO Leeds