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Low pay commission to look into salary sacrifice
The government has asked the Low Pay Commission to prepare a report on a range of issues relating to the National Minimum Wage (NMW) including:
- Consider whether the increases in the adult and development rates from October 2006, as recommended in their last report, are still appropriate in the light of economic circumstances and other relevant factors and, if not, make any recommendations for change;
- Review the level of the 16-17 year old rate;
- Review the operation of the accommodation offset and, if appropriate, make recommendations for any changes needed to the regulations;
- Review the treatment of benefits-in-kind, including where those benefits are offered as part of a salary sacrifice arrangement.
The LPC must report back to the government by the end of February 2006.
The Commission's 2005 Report noted employers' concerns that they were unable to offer salary sacrifice arrangements on benefits such as childcare vouchers, home computers and pensions to some of their lowest paid workers.
At present, benefits-in-kind (with the exception of accommodation up to a specified daily offset limit) cannot count towards the calculation of the minimum wage, and so if cash pay were to fall below the minimum wage as a result of a salary sacrifice, the employer would be acting unlawfully. The Government accepted the Commission's recommendation that it should consider the issue of salary sacrifice in depth and report by February 2006, but broadened the review to cover the minimum wage treatment of all benefits-in-kind, including where they are provided by means of a salary sacrifice arrangement.
The LPC are looking into:
- The types of benefits-in-kind offered by employers in low-paying sectors and how commonly they feature;
- The reasons why they are offered to staff;
- The value of such benefits in relation to overall remuneration packages;
- Any impact of the minimum wage on the provision of benefits in-kind or on the operation of salary sacrifice schemes.
Source: The Low Pay Commission
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