National Minimum Wage - National minimum wage and “travel schemes”

Written by Ian Congreave - Filed under: National Minimum Wage, Statutory and Other Payments and Deductions on December 18th, 2009

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The 2009 Pre-Budget Report documents announced that HMRC and the Department for Business, Innovation and Skills (BIS) are to consult early in 2010 on proposed changes to the National Minimum Wage Regulations to tackle the issues raised by so-called “travel schemes”.

Such “travel schemes” are operated by labour providers and “umbrella companies” in order to reduce PAYE tax and NICs. They take advantage of the tax relief available for expenses paid in respect of business journeys from home to a temporary place of work. Typically, workers sacrifice part of their salary for an equivalent payment of travel and subsistence expenses. The employer ensures that the expenses are not taxable by obtaining a dispensation from HMRC.
As travel expenses do not constitute “wages” for the purpose of the National Minimum Wage, workers may, as a result of the salary sacrifice, be paid less that the statutory minimum. Workers’ entitlements to earnings-related social security benefits may also be affected.

Further information:

Gangmasters Licensing Authority – GLA Brief