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HMRC internal manual

National Minimum Wage Manual

HM Revenue & Customs
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Deductions and payment from workers: childcare costs

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 12(1) & 12(2)(e)
* before 6 April 2015; National Minimum Wage Regulations 1999, regulations 32(1)(b) & 35(e)

If a worker has childcare costs deducted from pay, and paid by the employer to a third party (for example a nursery) on the worker’s behalf, the deduction will not reduce the worker’s national minimum wage pay, provided it is the worker’s liability to make the payment (NMWM11180).

However, if the worker is employed at the nursery, the deduction is not being paid to a third party but instead is being paid to the employer and so will always reduce national minimum wage pay. In these circumstances, the deduction is made for the use and benefit of the employer (NMWM11020).

Where a worker makes payment to their employer for employer provided childcare costs, such as by cheque, standing order or direct debit, then the payment will NOT reduce national minimum wage pay - provided it is not made in order to comply with a contractual requirement or any other requirement imposed upon the worker by the employer. In these circumstances the worker is simply purchasing goods and services from their employer after the worker has received their national minimum wage pay (NMWM11130).

See also Vouchers (NMWM09320), Salary sacrifice (NMWM09300).

For general advice on how deductions and payments from workers affect national minimum wage pay, See NMWM11020 and NMWM11030.