COMPLIANCE
Safe as houses? Considerations when your employee is also your tenant
Jeni Morris ACIPP, head of the national minimum wage (NMW) team at EY, shines a light on considerations for employers providing accommodation to their workers
W e all know that NMW legislation is complex, with technical breaches increasingly impacting employers across all sectors. Potentially the most bizarre risks come about when an employer provides accommodation to their workers. Accommodation is the only benefit in kind which can count towards a worker’s pay for NMW purposes. Many employers, particularly those in the hospitality, retail and leisure industries, provide staff accommodation. Often, they don’t fully appreciate the impact this can have on their workers’ pay for NMW purposes. Minimum wage breaches can be both financially and reputationally damaging – with 200% penalties and public naming and shaming awaiting employers found to have underpaid as part of an investigation by HM Revenue and Customs (HMRC). These penalties are likely to increase in severity in the near future, so it’s more important than ever to understand risks like this one.
the accommodation provided is optional, the offset and connected NMW calculations only count when the worker uses it l employers should exercise care where they offer accommodation to both the general public and their employees – and ensure the relevant calculations are made when the tenant is a worker or employee for any company linked to, or part of a group, with their employer. For example, if an employer-owned flat is let to the public at £150 per week but is offered to a worker on exactly the same terms, the amount in excess of the £63.70 offset (i.e., £86.30) will be reduced from the workers’ pay in that period for NMW purposes. According to the government, this applies even where the accommodation is provided by another group company l rent, gas / electricity and water all count as accommodation charges l there are some limited exceptions / specific rules for local housing authority and social housing providers, and for higher or further education institutions. Accommodation rates have soared over recent years, with the average rate for a flat in Greater London being £2,000 per month and £1,087 in the rest of the UK (according to research conducted by MoveIQ). The accommodation offset amount lags behind at only £9.10 a day, causing relatively high paid employees to be underpaid NMW in some scenarios. With so many practical and technical complexities, employers often unintentionally breach NMW rules. There’s a huge importance, now more than ever, in carrying out comprehensive and competent self-reviews of processes to ensure compliance. n
accommodation and then charges rent (whether paid by deduction or payment from the worker), the worker’s pay is reduced by the amount charged above the accommodation offset amount in each pay period this happens. Therefore, the higher the excess, the lower a worker’s pay for NMW purposes l if the amount charged by the employer is at or below the offset rate, there’s no effect on the worker’s NMW pay l some employers may provide accommodation for free, in which case, the offset rate is added to the worker’s pay l interestingly, if the rate charged is below the full offset rate, the ‘balance’ between the amount charged and the offset rate isn’t added to the worker’s pay for NMW purposes. This only happens when the accommodation is provided for free. It can be advantageous for an employer not to charge rent, but to lower the worker’s contractual pay by an amount equivalent to the rent that would have been charged. In this instance, employers would receive the full benefit of the accommodation ‘offset’ amount, without risking underpayment through additional rent costs. There may, of course, be other considerations (like the impact on other benefits or employment rights) to be made before taking this course of action. Looking at the accommodation offset itself, there are a few key points to consider: l it doesn’t matter if the cost of the accommodation is taken from the worker’s wages beforehand, or if the worker pays the cost after they receive their wages. Both will be treated in the same way for NMW purposes l use of the accommodation doesn’t need to be mandatory to affect NMW pay. When
Accommodation offset The ‘accommodation offset’ is a
government set amount employers can use towards accommodation costs when they provide workers with living accommodation. However, where the amount an employer charges a worker for accommodation is higher than the offset amount, it can cause someone earning at, or even above, NMW rates to be underpaid. The rate is determined by HMRC every April and is currently £9.10 per day or £63.70 a week. The accommodation offset affects NMW pay depending on how much the employer charges the worker for accommodation: l where an employer provides
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| Professional in Payroll, Pensions and Reward |
Issue 92 | July - August 2023
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