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HMRC internal manual

National Minimum Wage Manual

From
HM Revenue & Customs
Updated
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Accommodation and accommodation offset: examples of calculating pay for National Minimum Wage where accommodation provided free of charge

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(1)(e)(i)-(ii) & 16
* before 6 April 2015; National Minimum Wage Regulations 1999, regulations 30(d) and 36 

Explanation

When living accommodation is provided free of charge, a notional amount is added to the worker’s pay to calculate their national minimum wage pay (NMWM10030).

In these three examples the rates are based on those that applied for the 2012/13 rate year:

  • Main rate: £6.19
  • Accommodation offset rate: £4.82 per day (£33.74 weekly maximum)

Example 1

A worker is entitled to be paid the national minimum wage at the main rate. Their pay reference period is a week. They are paid the main rate per hour for a 45 hour week. Accommodation is provided without charge by their employer five days a week.

Total weekly pay: £6.19 x 45 = £278.55

Rent charged: £0

To calculate their national minimum wage pay:

  1. Identify the applicable notional offset:
* £4.82 x 5 = £24.10
  1. Add the applicable notional offset to their weekly pay:
* £278.55 + £24.10 = £302.65
  1. Find their hourly rate by dividing national minimum wage pay by hours worked: £302.65 ÷ 45 = £6.73 per hour

For national minimum wage purposes, the worker’s hourly rate is £6.73 an hour. This rate is more than the national minimum wage.

Example 2

A worker is entitled to be paid the national minimum wage at the main rate. Their pay reference period is a calendar month. They are paid £5.50 an hour for working 160 hours per month. £5.50 is below the main rate. Accommodation is provided without charge by their employer for 31 days during a month.

Total monthly pay: £5.50 x 160 = £880.00

Rent charged: £0

To calculate their national minimum wage pay:

  1. Identify the applicable notional offset:
* £4.82 x 31 = £149.42
  1. Add the notional offset to the monthly pay:
* £880.00 + £149.42 = £1029.42
  1. Find their hourly rate by dividing national minimum wage pay by hours worked: £1029.42 ÷ 160 = £6.43 per hour

For national minimum wage pay purposes, the worker’s hourly rate is £6.43 an hour. This rate is more than the national minimum wage.

Example 3

A worker is entitled to be paid the national minimum wage at the main rate. Their pay reference period is a week. They are paid £5.00 an hour for a 45-hour week. £5.00 is below the main rate. Accommodation is provided without charge by their employer seven days a week.

Total weekly pay: £5.00 x 45 = £225.00

Rent charged: £0

To calculate national minimum wage pay:

  1. Identify the applicable notional offset:
* £4.73 x 7 = £33.74
  1. Add the applicable notional offset to the weekly pay:
* £225.00 + £33.74 = £258.74
  1. Find their hourly rate by dividing national minimum wage pay by hours worked: £258.74 ÷ 45 = £5.75 per hour.

For national minimum wage pay purposes, the worker’s hourly rate is £5.75 an hour. This rate is less than the national minimum wage and the employer will need to correct any underpayment and increase the hourly rate to at least national minimum wage.