Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

National Minimum Wage Manual

From
HM Revenue & Customs
Updated
, see all updates

Accommodation and accommodation offset: considering the charge for living accommodation against the offset; scenario 1, payments for rent not aligning with pay reference periods

Explanation

Whenever an employer provides living accommodation to a worker in a pay reference period it is necessary to consider the accommodation offset. This applies even where a specific charge falls outside of the pay reference period in question. For example, a weekly paid worker may be charged rent on a monthly basis. Where this occurs, the amount the employer is entitled to charge in respect of each pay reference period has to be identified in order for the accommodation offset calculation to be applied.

In these two 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. Living accommodation is provided for the whole month, charged at £400 per month.

Total weekly pay: £6.19 x 45 = £278.55

Rent charged: £400 per month

To calculate their national minimum wage pay:

  1. Identify the amount the employer is entitled to charge in respect of the pay reference period:
* £400 x 12 = £4800 per year
* £4800 per year = £92.31 per week [£4800/52] 
  1. Identify the applicable accommodation offset:
* £4.82 x 7 = £33.74
  1. Identify the amount that the charge exceeds the offset:
* £92.31 - £33.74 = £58.57
  1. Reduce the weekly pay by the amount charged in excess of the offset
* £278.55 - £58.57 = £219.98
  1. Find their hourly rate by dividing national minimum wage pay by hours worked:
* £219.98 ÷ 45 = £4.89 per hour

For national minimum wage purposes, the worker’s hourly rate is £4.89 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.

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 £7.75 an hour for working 160 hours per month. During a month of 31 days, living accommodation is provided on a week by week basis, charged at £100 per week.

Total monthly pay: £7.75 x 160 = £1240.00

Rent charged: £100 per week

To calculate their national minimum wage pay:

  1. Identify the amount the employer is entitled to charge in respect of the pay reference period:
* £100 x 52 = £5200 per year
* £5200 per year = £433.33 per month [5200/12]
  1. Identify the applicable accommodation offset:
* £4.82 x 31 = £149.42
  1. Identify the amount that the charge exceeds the offset:
* £433.33 - £149.42 = £283.91
  1. Reduce the monthly pay by the amount charged in excess of the offset
* £1240 - £283.91 = £956.09
  1. Find their hourly rate by dividing national minimum wage pay by hours worked:
* £956.09 ÷ 160 = £5.98 per hour

For national minimum wage purposes, the worker’s hourly rate is £5.98 an hour. The application of the accommodation offset rules result in the worker’s pay being less than the national minimum wage despite the initial hourly rate exceeding the main rate. The employer will need to correct any underpayment and increase the hourly rate to at least national minimum wage.