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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: salary sacrifice

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, regulation 9
* before 6 April 2015; National Minimum Wage Regulations 1999 regulation 30 

A salary sacrifice is where a worker gives up their contractual entitlement to a portion of their salary usually in exchange for something else, commonly a non taxable benefit such as child-care vouchers. This can be popular with employers and workers as it can provide benefits to the worker whilst also reducing tax and/or NIC liabilities.

Where a genuine salary sacrifice is in place, the worker no longer has entitlement to that amount of pay under their contract. Therefore the amount of the salary sacrifice is not included in a worker’s total remuneration (NMWM09050) for national minimum wage pay purposes.

Any payment or benefit received in place of the salary sacrificed must be considered on its own merits.

For example:

Replacement of salary with vouchers NMWM09350.

Replacement of salary with “expenses”NMWM09170.

Salary Sacrifice Schemes

It is very important to identify the actual nature of all payments and deductions associated with salary sacrifice schemes. As with any other arrangement the nature of each element of the arrangement must be identified, and any evidence tested with all parties.

See also Travel Schemes (NMWM11110).