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HMRC internal manual

National Minimum Wage Manual

From
HM Revenue & Customs
Updated
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Pay reference periods & elements of pay: expenses paid to the worker by the employer

Relevant legislation

The legislation that applies to this page is as follows:

For pay reference periods commencing

* on or after 6 April 2015; National Minimum Wage Regulations 2015, regulations 9, 10(l) & 10(n)
* before 6 April 2015; National Minimum Wage Regulations 1999 regulations 30, 31(1)(f) & 31(1)(j)

Where an employer makes a payment to a worker to reimburse expenses actually incurred in carrying out their employment, the amount of that payment should initially be included in the worker’s total remuneration (NMWM09060) but a corresponding reduction is then made when calculating the worker’s national minimum wage pay (NMWM09070). This applies even when the employer calls the payment an allowance (NMWM09090).

For example: A time worker is paid £100 plus £10 to reimburse his week’s expenses. The worker’s total remuneration for that pay reference period is therefore £110. However, any payment in respect of expenses incurred in connection with the employment, in this case £10, is subsequently reduced from the calculation of national minimum wage pay. This will then result in the worker’s national minimum wage pay being £100 (£110 minus £10).

Where an employer makes a round sum payment to reimburse a worker’s expense, then any amount which can be identified as expenses incurred on account of expenditure in connection with the employment will reduce the calculation of national minimum wage pay (NMWM09070).

For example: A time worker is paid £500 per week plus £10.00 per day from Monday to Thursday when he is sent away from the office on business to reimburse him for the extra expense of purchasing an evening meal. The worker’s total remuneration for that pay reference period is therefore £540 (£500 plus 4x £10).

However, any payment in respect of evening meal expenses which are expenditure in connection with the employment, in this case £40 is subsequently reduced from the calculation of national minimum wage pay. This will then result in the worker’s national minimum wage pay being £500 (£540 minus £40). However, if not all the £40 was used to purchase evening meals and, say only £30 was used, then only that element of the expenses payment would be reduced from the calculation of national minimum wage pay. This will then result in the worker’s national minimum wage pay being £510 (£540 minus £30).

For national minimum wage purposes, expenses means expenditure incurred in connection with the worker’s employment. Therefore, only expenses relating to the actual performance of the employment are considered to be expenses for national minimum wage purposes.

Tax free payments are sometimes made by employers to workers to cover travel from home to a temporary workplace. These payments are often labelled or called “travel expenses” and may also cover associated subsistence and accommodation. They are not paid to reimburse expenditure in connection with the worker’s employment and are therefore not expenses for national minimum wage purposes. However, special rules apply to these payments from 1 January 2011 (NMWM09175).

If reimbursement of an expense is made by a payment labelled an “allowance” (NMWM09090) it is not an allowance for national minimum wage purposes and must be treated as an expense on its own merits.

Special consideration is needed when looking at expenses paid to voluntary workers who may qualify for an exemption from national minimum wage entitlement, see (NMWM05090).

Worker pays an expense or has an amount deducted for an expense

See NMWM11100 if a worker is charged for an expense related to his employment either:

  • by having an amount deducted from his wages by his employer, or
  • by making a payment to his employer or a third party.