Adam Phillips

Thank you. Is this definitely the right option? I don't think I'm being paid less than the minimum wage , I'm arguing the opposite in fact, and the only options available via that link either relate to that or some other form of complaint that doesn't apply to me. I'm more interested in the exact calculation that is required when testing for a NMW breach when using salary sacrifice. There is information available in your guidance but it uses rather vague terms and doesn't explicitly say what's included and excluded for this calculation. Adam

Hi. My employer has recently changed payroll systems and I now find myself in breach of the NMW rule for salary sacrifice where I previously was not. My question relates to pension contributions from different sources when calculating the wage for the NMW breach. I have searched through the HMRC documentation but cannot see anything that relates to my specific query. I think an example would best highlight the question I'm asking, I've chosen figures that make the calculations easy so please disregard other factors such as the annual allowance etc. I'm only interested in the NWM aspect and have chosen values that highlight what I believe is the error in my employer's new system. Let's take an employee who earns £10k a month and makes a 50% pension contribution. On a regular month the basic breakdown would be. Gross pay 10,000 Pension contribution 5000 Pay for NMW calculation 5000 Taxable pay 5000 Myself and my employer are in agreement with this. Now let's say the same employee receives a £10k bonus one month that is pensionable, to establish the worst case scenario let's also say this bonus does not count towards the NMW total. My employer's calculation for this scenario is as follows. Gross pay 20,000 (10k salary + 10k bonus) Pension contribution 10,000 (5k from salary + 5k from bonus) Pay for NMW calculation 0 (10k salary - 10k pension total contribution, derived from salary and bonus) NMW breach Taxable pay 20,000 (As salary sacrifice failed due to NMW breach) I'm of the opinion that this cannot be correct but they are adamant that this is the correct way to work it out. Surely if you're only counting basic pay as earnings then you can only test that against the pension contribution derived from that basic pay, if you include pension contributions from other sources then you must also includes those sources as pay, although this is pointless as it would only increase the hourly rate. Using their method ends up with the perverse situation I've highlighted above where earning more money and having a higher taxable income and take home pay means you can find yourself in breach of the NMW rule. This is actually the situation I find myself in now. Are they making a mistake?