SolvedNMWM10220 | Accommodation and accommodation offset: examples of calculating pay for National Minimum Wage where charge for accommodation is above 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, regulations 14(1) & 16
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 higher than the accommodation offset, then any excess amount above the accommodation offset will reduce 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 £75 per week.
Total weekly pay: £6.31 x 45 = £283.95
Rent charged: £75.00
To calculate their National Minimum Wage pay:
Identify the applicable accommodation offset:
£4.91 x 5 = £24.55
Identify the amount that the charge exceeds the offset:
£75.00 - £24.55 = £50.45
Reduce the weekly pay by the amount charged in excess of the offset
£283.95 - £50.45 = £233.50
Find their hourly rate by dividing National Minimum Wage pay by hours worked: £233.50 ÷ 45 = £5.19 per hour
For National Minimum Wage purposes, the worker's hourly rate is £5.19 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.
Example 2
A worker is entitled to be paid the National Minimum Wage at the main rate. Their pay reference period is a calendar month. They are paid £7.75 an hour for working 160 hours per month. Living accommodation is provided for 31 days in a month, charged at £400 per month.
Total monthly pay: £7.75 x 160 = £1240.00
Rent charged: £400
To calculate their National Minimum Wage pay:
Identify the applicable offset:
£4.91 x 31 = £152.21
Identify the amount that the charge exceeds the offset:
£400 - £152.21 = £247.79
Reduce the monthly pay by the amount charged in excess of the offset
£1240 - £247.79 = £992.21
Find their hourly rate by dividing National Minimum Wage pay by hours worked: £992.21 ÷ 160 = £6.20 per hour
For National Minimum Wage purposes, the worker's hourly rate is £6.20 an hour. The application of the accommodation offset rules result in the worker’s pay being less than the National Minimum Wage despite the initial hourly rate exceeding the main rate. The employer will need to correct any underpayment and increase the hourly rate to at least National Minimum Wage.