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HMRC internal manual

National Minimum Wage Manual

HM Revenue & Customs
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Deductions and payments from workers: travel schemes

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 16
* before 6 April 2015; National Minimum Wage Regulations 1999, Regulations 30 to 37

Some employers implement arrangements aimed at minimising tax and National Insurance liabilities which can have an impact on the calculation of national minimum wage pay. Such schemes are sometimes marketed as “travel”, “travel and subsistence”, “dispensation”, “salary sacrifice” or “temporary workplace” schemes.

Typically, a scheme might involve an employer who recruits temporary workers who are then engaged at a series of temporary workplaces. These schemes rely on a reduction in net pay [usually through salary sacrifice (NMWM09300)], and a “tax free payment” to the worker usually linked to travel, subsistence and/or accommodation (NMWM09175)].

This matter can be further complicated by the involvement of third parties such as umbrella companies, where an umbrella company acts as the employer to individuals recruited by labour providers to provide services to labour users. A continuous employment relationship is created by linking together temporary assignments in an overarching contract of employment. It can be challenging to establish who the employer is for national minimum wage purposes (NMWM05040).

How to consider travel schemes

The way such schemes operate can vary and it is vital to understand the precise nature of each transaction within the arrangement and obtain evidence to support the employer’s explanation to confirm that their description reflects how the scheme runs in practice. This includes talking to workers about their understanding of the arrangements.

There may be a number of steps to consider and each step must be considered on its own merits. Any payment to the workers must be considered to see if it is a payment for national minimum wage purposes (NMWM09060) and whether it reduces national minimum wage pay (NMWM09070 and NMWM09175). Any deductions and payments from the workers must also be considered to confirm whether they reduce national minimum wage pay (NMWM11010). As with any case it is important to ensure a full understanding of the transactions and not to accept labels attached by employers. For example, a payment to a worker labelled “expenses” might not be an expense for national minimum wage purposes (NMWM09170).

For administration charges or fees associated with these schemes see NMWM11050.

For salary sacrifice arrangements see NMWM09300.

For tax free payments to workers associated with these schemes see NMWM09175.