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HMRC internal manual

National Minimum Wage Manual

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HM Revenue & Customs
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Deductions and payments from workers: payments from workers to employers and third parties - general approach

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 to 15
* before 6 April 2015; National Minimum Wage Regulations 1999, regulations 31(h), 34 & 35

Where a worker makes a payment to either his employer or a third party, it can affect the worker’s national minimum wage pay (NMWM09040). It is important to understand the nature of the transaction and not accept labels put on payments by a worker or employer.

National minimum wage legislation distinguishes between payments a worker makes to his employer (NMWM11030) and deductions an employer makes from the worker’s pay (NMWM11020).

A payment made by a worker to either their employer or a third party will always reduce the worker’s national minimum wage pay if it is:

A payment to the employer or a third party on account of a worker’s expenditure in connection with his employment (whether or not it is reimbursed) (NMWM11100)

Or 

  1. A payment that the employer can retain for his own use or benefit unless it is a:  
* contractual payment in respect of misconduct ([NMWM11060](https://www.gov.uk/hmrc-internal-manuals/national-minimum-wage-manual/nmwm11060))
* payment to repay a loan or advance of wages
* payment to refund an accidental overpayment of wages
* payment to purchase shares other securities or share options or share in a partnership 
* payment to an employer who is a local housing authority or registered social landlord for the provision of living accommodation and the accommodation offset does not apply ([NMWM10180](https://www.gov.uk/hmrc-internal-manuals/national-minimum-wage-manual/nmwm10180)).
* payment to an employer who is higher or further education institution for the provision of living accommodation and the accommodation offset does not apply ([NMWM10190](https://www.gov.uk/hmrc-internal-manuals/national-minimum-wage-manual/nmwm10190)).
* payment in respect of a purchase of goods and services from the employer except when it is madeto comply with a contractual requirement or any other requirement imposed by the employer ([NMWM11130](https://www.gov.uk/hmrc-internal-manuals/national-minimum-wage-manual/nmwm11130)).

National minimum wage pay will only be reduced in the relevant Pay Reference Period in which the payment was made. Legislation does not allow for such payments to be “allocated” to other Pay Reference Periods (see example under deductions (NMWM11020)).

See also NMWM11170 for treatment of payments a worker makes to a third party.