NMWM09170 - Pay reference periods and elements of pay: expenses paid to the worker by the employer
Relevant legislation
The legislation that applies to this page is as follows:
- National Minimum Wage Regulations 2015, regulations 9, 10(l) & 10(n)
Where an employer makes a payment to a worker to reimburse expenses actually incurred in carrying out their employment, the amount of that payment should initially be included in the worker鈥檚 total remuneration (NMWM09060) but a corresponding reduction is then made when calculating the worker鈥檚 National Minimum Wage pay (NMWM09070). This applies even when the employer calls the payment an allowance (NMWM09090).
For example: A time worker is paid 拢100 plus 拢10 to reimburse his week鈥檚 expenses. The worker鈥檚 total remuneration for that pay reference period is therefore 拢110. However, any payment in respect of expenses incurred in connection with the employment, in this case 拢10, is subsequently reduced from the calculation of National Minimum Wage pay. This will then result in the worker鈥檚 National Minimum Wage pay being 拢100 (拢110 minus 拢10).
Where an employer makes a round sum payment to reimburse a worker鈥檚 expense, then any amount which can be identified as expenses incurred on account of expenditure in connection with the employment will reduce the calculation of National Minimum Wage pay (NMWM09070).
For example: A time worker is paid 拢500 per week plus 拢10.00 per day from Monday to Thursday when he is sent away from the office on business to reimburse him for the extra expense of purchasing an evening meal. The worker鈥檚 total remuneration for that pay reference period is therefore 拢540 (拢500 plus 4x 拢10).
However, any payment in respect of evening meal expenses which are expenditure in connection with the employment, in this case 拢40 is subsequently reduced from the calculation of National Minimum Wage pay. This will then result in the worker鈥檚 National Minimum Wage pay being 拢500 (拢540 minus 拢40). However, if not all the 拢40 was used to purchase evening meals and, say only 拢30 was used, then only that element of the expenses payment would be reduced from the calculation of National Minimum Wage pay. This will then result in the worker鈥檚 National Minimum Wage pay being 拢510 (拢540 minus 拢30).
For National Minimum Wage purposes, expenses means expenditure incurred in connection with the worker鈥檚 employment. Therefore, only expenses relating to the actual performance of the employment are considered to be expenses for National Minimum Wage purposes.
Tax free payments are sometimes made by employers to workers to cover travel from home to a temporary workplace. These payments are often labelled or called 鈥渢ravel expenses鈥� and may also cover associated subsistence and accommodation. They are not paid to reimburse expenditure in connection with the worker鈥檚 employment and are therefore not expenses for National Minimum Wage purposes. However, special rules apply to these payments from 1 January 2011 (NMWM09175).
If reimbursement of an expense is made by a payment labelled an 鈥渁llowance鈥� (NMWM09090) it is not an allowance for National Minimum Wage purposes and must be treated as an expense on its own merits.
Special consideration is needed when looking at expenses paid to voluntary workers who may qualify for an exemption from National Minimum Wage entitlement, see (NMWM05090).
Worker pays an expense or has an amount deducted for an expense
See NMWM11100 if a worker is charged for an expense related to his employment either:
- by having an amount deducted from his wages by his employer, or
- by making a payment to his employer or a third party.