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

HMRC internal manual

National Minimum Wage Manual

Deductions and payment from workers - effect of deductions and payments: legislative and policy objectives

Relevant legislation

The legislation that applies to this page is as follows:

* National Minimum Wage Regulations 2015, regulations 9 to 16

National minimum wage pay (NMWM09040) is calculated in a specific way laid down in legislation. Legislation defines:

  • what payments made to the worker count for national minimum wage pay (NMWM09060)
  • what amounts must be reduced from that pay (NMWM09070)


  • what effect deductions made by an employer can have on national minimum wage pay (NMWM11020)
  • what effect payments the worker makes to either third parties or their employer (NMWM11030) can have on national minimum wage pay.
  • what effect employer provided living accommodation has on national minimum wage pay (NMWM10000).

It is important to distinguish between:

  • payments a worker makes to his employer or a third party (NMWM11030) and
  • deductions which are made from the worker’s pay before he receives it (NMWM11020).

National minimum wage legislation was designed to protect workers from being exploited by employers who could otherwise pay their workers unreasonably low wages and/or charge the worker unreasonable amounts which would reduce their pay. The protection of workers is a high priority for Government and the policy intention behind the legislation is to ensure workers are paid at least national minimum wage rates in a monetary format each pay reference period (allowing for the accommodation offset if applicable).

Employers’ payroll arrangements can sometimes be quite complex involving a series of transactions. It is important to obtain a clear understanding of the arrangements, including the identification of the recipient and to examine documentary evidence supporting the arrangements where this is available.

There is no concept of “illegal deductions”, “non-allowable deductions” or “illegal payments” in national minimum wage legislation. The arrangements of the parties might reduce the calculation of national minimum wage pay, but that does not make such arrangements “illegal” from a national minimum wage perspective. For national minimum wage purposes HM Revenue & Customs is only concerned with the effect of a payment or deduction on national minimum wage pay.