SolvedNMWM10210 | Accommodation and accommodation offset: examples of calculating pay for National Minimum Wage where charge for accommodation is at or below the accommodation offset rate
From HM Revenue & Customs · National Minimum Wage Manual
Relevant legislation
The legislation that applies to this page is as follows:
National Minimum Wage Regulations 2015, regulation 14(1)
Explanation
When an employer charges a worker for living accommodation (NMWM10160) the charge must be taken into account by comparing it to the worker’s accommodation offset calculated using the accommodation offset rate (NMWM03080). If the charge is equal to, or less, than the accommodation offset rate, then there is no impact on the worker’s National Minimum Wage pay (NMWM10030).
In these two examples the rates are based on those that applied for the 2012/13 rate year:
Main rate: £6.31
Accommodation offset rate: £4.91 per day (£34.37 weekly maximum)
Example 1
A worker is entitled to be paid the National Minimum Wage at the main rate. Their pay reference period is a week. They are paid the main rate per hour for a 45 hour week. Living accommodation is provided 5 days a week, charged at the accommodation offset rate.
Total weekly pay: £6.31 x 45 = £283.95
Rent charged: £24.10
To calculate their National Minimum Wage pay:
Identify the appropriate accommodation offset:
£4.91 x 5 = £24.55
As the rent is less than the accommodation offset there is no change to the worker’s pay for National Minimum Wage purposes.
Find their hourly rate by dividing National Minimum Wage pay by hours worked: £283.95 ÷ 45 = £6.31 per hour
For National Minimum Wage purposes, the worker's hourly rate is £6.31 an hour. The worker is being paid at the National Minimum Wage rate.
Example 2
A worker is entitled to be paid the National Minimum Wage at the main rate. Their pay reference period is a week. They are paid £6.10 an hour for a 45 hour week. £6.10 is below the main rate. Living accommodation is provided 7 days a week, charged at £4.00 per day.
Total weekly pay: £6.10 x 45 = £274.50
Rent charged: £4 x 7 = £28 per week
To calculate their National Minimum Wage pay:
Identify the applicable accommodation offset:
£4.91 x 7 = £34.37
As the rent is less than the accommodation offset there is no change to the worker’s pay for National Minimum Wage purposes. Please note that in contrast to where accommodation is provided for no charge (NMWM10200) no notional offset is applicable even though the employer has charged less than the full accommodation offset rate.
Find their hourly rate by dividing National Minimum Wage pay by hours worked: £274.50 ÷ 45 = £6.10 per hour
For National Minimum Wage pay purposes, the worker's hourly rate is £6.10 an hour. This rate is less than the National Minimum Wage and the employer will need to correct any underpayment and increase the hourly rate to at least National Minimum Wage.