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HMRC internal manual

National Minimum Wage Manual

From
HM Revenue & Customs
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Deductions and payments from workers: transport payments and deductions

 

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 & 13
* before 6 April 2015; National Minimum Wage Regulations 1999, regulations 32, 33, 34 & 35

Charges involving transport should be considered under normal deduction (NMWM11020) and payment (NMWM11030) rules.

As with all deductions and payments it is essential that the nature of all the arrangements and transactions involved are fully understood. Transport costs often feature in “salary sacrifice schemes” (NMWM09300), and in “travel schemes” (NMWM11110).

It is important to distinguish between any charges (which may be described by various labels, such as an “expense” or an “allowance”) and get a full understanding of what each individual charge represents.

It is also important to determine the nature of the transport; i.e. are the charges in respect of home to work transport or for transport connected to the employment.

Deductions for transport

Where a deduction is made from a worker’s pay, the amount will always reduce national minimum wage pay unless it is:

  • An amount owed by the worker to a third party (e.g. a transport company) (NMWM11180). In these cases, it is important to confirm that the worker is paying his own costs and is not simply meeting the employer’s liability to the transport company. If the employer has contracted with the transport company to provide transport to workers, then any deduction will reduce the worker’s national minimum wage pay, as it is being used for the employer’s own use and benefit. It is immaterial whether or not the worker benefits from the arrangement or whether the service provision is subsidised or running at a loss.

Example 1 - An employer contracts with a third party bus company to provide a transport to work service for their workers. The employer deducts a transport charge from the worker, which is then paid over to the third party.

The deduction will reduce the worker’s national minimum wage pay. This is because the arrangement for the provision of transport is between the employer and the third party (i.e. the employer is purchasing the service from the third party). The employer is liable to pay the bus company for the provision of the transport and the deduction from the worker made by the employer is being used for the employer’s own use and benefit to meet their liability to the bus company.

Whilst the employer may be immediately paying the monies deducted over to the third party, the fact remains that the employer will be free to use the monies for any purposes they so wish. This situation applies even if the employer is making a loss by providing the service to the workers.

Example 2 -The workers agree to pay a weekly fee to use a home to work bus service provided to them by a third party. The employer is authorised by the workers to deduct an amount from their pay and pass it directly to the third party on their behalf. The amount deducted would not reduce the calculation of national minimum wage pay, provided that the arrangement to use or pay for such a service is not an expense of the employment, a contractual requirement or any other requirement imposed by the employer on the worker in connection with his employment.

Payments for transport

A payment from the worker to the employer for transport will always reduce national minimum wage pay (NMWM11000) if it is:

  • the result of a contractual requirement, or
  • the result of any other requirement imposed by the employer, or
  • it is a payment for expenditure in connection with the employment (whether or not it is reimbursed). If the payment is reimbursed see NMWM09170.

Example 3 - a worker’s contract says he must pay his employer for home to work transport. The payment will reduce national minimum wage pay as it is the result of a contractual requirement.

Example 4 - a worker must report to one site in the morning and during the course of his working day is required to visit another site ten miles away. The employer provides a train ticket for the journey but requires a payment from the worker to cover the cost. The payment is expenditure in connection with the employment and therefore reduces the worker’s national minimum wage pay.

Example 5 - An employer runs a bus service to pick up staff near their homes and take them to work. The workers make a weekly cash payment to the employer for the service. Provided the payment is not a contractual or other requirement imposed on the worker by the employer and the expenditure is not for transport in connection with the employment, the payment will not reduce national minimum wage pay.

Example 6 - An employer enters into a contract with a bus company to pick up workers and take them to work. The workers pay the employer for the service via a standing order. Provided the payment is not a contractual or other requirement imposed on the worker by the employer and the expenditure is not for transport in connection with the employment, the payment will not reduce national minimum wage pay.