Employer guidance for calculating statutory minimum wage rates

The National Living Wage (NLW) and National Minimum Wage (NMW) are the minimum hourly rates employers must legally pay to all workers regardless of the size of the business.  

The minimum wage a worker should receive depends on their age and whether they are an apprentice.  

From April 2026, The Fair Work Agency became responsible for enforcing worker rights and this includes NMW compliance and there are financial penalties and reputational damage associated with getting NMW compliance wrong. 

NHS staff are paid above the legal minimum rate. However, minimum wage compliance is not just about headline salary. 

Employers also need to consider: 

A worker may appear to be paid well overall, but they could still fall below minimum wage once the legal calculation is applied. 

Minimum wage rates are set by government each year following recommendations from the Low Pay Commission (LPC).   

The current minimum wage rates can be found on the GOV.UK website. 

For NHS employers, it is good practice to review minimum wage compliance each year when: 

Since the NLW was established in April 2016, Agenda for Change pay rates have generally remained above minimum wage levels. Even so, NHS employers should still review local arrangements carefully, particularly for lower-paid staff. 

The table below shows the 2026 NMW rates set by government and the hourly rate of pay at the bottom of the Agenda for Change structure (closed band 1 and band 2). 

1 April 2026 position:

A deduction will usually reduce NMW pay if it is for the employer’s own use and benefit. Meaning, if there is a deduction taken from a worker where the employer holds or can use the money as they wish, or the deduction is used to pay an employer’s liability, that deduction will reduce NMW pay. 

A salary sacrifice arrangement is where an employee agrees to reduce their pay in return for a non-cash benefit – such as: 

Whilst salary sacrifice arrangements are commonplace, they are not recognised in the NMW legislation, therefore any reduction in pay as a result of an employee entering into a salary sacrifice arrangement results in a change to their contractual pay which means that the new, lower amount of pay is the amount considered for NMW purposes.  

Example: An employee chooses to salary sacrifice £1,000 of pay in exchange for a bike under the cycle to work scheme.  

Gross salary of £35,000 is therefore reduced by £1,000, resulting in £34,000 post-sacrificed salary counting for NMW purposes.

Where an employer provides accommodation to an employee, special rules apply.  The government sets a daily 'accommodation offset' amount which employers must consider where accommodation is provided.   

If an employer charges more than the offset amount the difference between the two amounts will reduce NMW pay. 

It is important for employers to note that it does not matter whether this is a gross or net deduction, or whether the employer simply charges the worker by any other means, e.g. direct debit, bank transfer.  

In addition, where there are any associated costs related to the provision of that accommodation, e.g. water, gas, electric, telephone etc. these also need to be factored into the overall accommodation cost and where the total exceeds the offset amount, the excess will reduce the worker's NMW pay in the period where the charge occurs. 

 An example is shown below: 

Example: An employee is provided with living accommodation by their employer. The current daily offset rate as of 1 April 2026 is £11.10.
 
The employer charges the worker £500 per month for the accommodation. The offset is currently £333.00 in a 30-day month. 

This means the workers NMW pay will be reduced by £167 (the difference) in that pay period.
 
If £100 was also charged for utility costs, this would increase the excess to apply as a deduction to pay in the pay period to £267.

Q1. Once a worker type is agreed, how can we easily identify which pay elements fall into the high-level categories? 

Once the worker type is confirmed, the next step in a NMW calculation is to decide which pay elements do and don't count towards NMW pay – see step 4. HMRC’s online guidance also outlines the more common pay elements and their effect on each work type. 

Q2. Would staff engaged on a casual/zero hours/bank agreement be considered an 'unmeasured worker'?  

Casual/zero hours/bank workers will likely fall into either the 'time' or 'unmeasured' worker category. They are unlikely to meet 'salaried' work criteria as hours and pay for individuals on zero hours/bank contracts will likely fluctuate from one pay period to another due to the variance in hours being worked in each pay period. A casual employee who is not on a permanent contract but has guaranteed hours is likely to be a time worker. 

Q3. Why is it important to identify worker category? 

How you calculate a workers NMW hourly rate varies across each of the four worker categories.  Therefore, it is important to establish the correct category before undertaking any NMW check to ensure the correct pay, deduction and working time rules are applied to ensure the correct NMW entitlement is being met. 

Q4. If a worker is required to travel to a location other than their main place of work, e.g. an apprentice travelling to college on their study day, or an employee required to attend a meeting at a different office, does the travel time count as working time?  

Normal home to work travel is not considered as working time for NMW purposes. This includes travelling from home to their normal place of work, their first task or first assignment of the day. The driving time from home to college and from college to home would not be considered as working time for NMW purposes.  

Q5. If the individual attends their workplace first and then travels to a different location and returns back to their workplace before going home, will all travel time incurred count as working time?

Some NHS trusts will operate over different sites where staff have to travel to undertake duties at another site, this time will count as working time. Similarly, staff may have roles where they are required to visit patients in their own homes, travel in these circumstances will also count as working time. 

Q6. What are “excess hours”?  

Most staff in the NHS are paid for additional hours worked; however, not all roles are contractually entitled to additional pay for extra time worked. Excess hours only accrue for salaried workers and are the hours worked over and above the basic contractual hours for which no additional pay has been received.  If these extra hours are not taken back by the worker as time off in lieu (TOIL), (and there are specific rules which apply where TOIL is considered for NMW purposes - see next question) the extra hours accrue throughout the NMW calculation year and if the actual hours worked in the year exceeds the basic annual hours before that year ends, the “excess hours” need to be taken into account in the NMW calculation in the relevant pay period and can result in a NMW breach.  

Where overtime/additional hours are worked and paid in the pay reference period (PRP) where they are carried out (or in the immediately following PRP) they do not count towards an excess hours calculation. 

Q7. In terms of excess hours, if an employee accrues TOIL for the extra hours worked, and takes these off at a future point, does this reduce the hours worked in future periods? 

Yes, where an effective TOIL policy is in place, the intended outcome would be that the salaried hours worked do not exceed their basic annual hours throughout the course of their calculation year - which means no excess hours are worked. Good practice here includes a robust keeping of time and attendance records to track accrued hours throughout the year. 

Q8. If an employee is required to travel and stay overnight for work, would their travel time count towards NMW pay? Would the time they stay away from home, but not physically working also count? 

Where an employee is away from home for the purposes of work - you should consider what time is actually spent 'working'. Travel from home to a place of work, and from the place of work back home is not considered as working time.   

Where they are carrying out tasks or required to be at or near a place of work, this will constitute 'working time'. Where they are not 'working', would not ordinarily be working and are not expected to work (for example, having dinner or in a hotel room watching TV) this would not constitute working time. If a worker travels from a place of work to another assignment/appointment - this is likely to be deemed as working time.  

Attending conferences, workshops, training sessions voluntarily, but with employer approval is not considered working time, unless it is considered a mandatory or expected requirement of the employer.   

Q9. How often should salary sacrifice arrangements be checked to ensure on-going compliance?  

Eligibility to participate in any salary sacrifice should be undertaken regularly and ideally as part of the payroll process for each pay reference period. The risk of a NMW breach increases where there are increases to the NMW rates (which includes annual increases or for example where younger workers have birthdays). Similarly delays/lack of pay awards can also impact on NMW compliance. Regular reviews to ensure continued NMW compliance are therefore important. Key stages for review include prior to the annual increase to NMW rates in April and when any changes are made to working hours and pay to check continued eligibility.  See the employers checklist under the salary sacrifice section for more detail. 

Q10. If an employee enters into a salary sacrifice arrangement to obtain a car (through a lease or hire purchase scheme) because they require a car for work-related duties, but their employer does not provide one, does the salary sacrifice reduce their pay for NMW purposes?

Where a salary sacrifice arrangement is in place - it will always reduce NMW pay. A salary sacrifice is a contractually agreed reduction of the workers’ salary in return for the benefit/service. The question references a situation where the employee needs a car to do their job role and that car is provided under a salary sacrifice scheme. In circumstances where an employee has a salary sacrifice car for their private use (with no business use) this is treated in exactly the same way for NMW purposes, in that any salary sacrifice will reduce NMW pay. 

Q11. Can you convert part of a salary sacrifice reduction for a lease car to a net deduction if there isn’t enough pay, or should the salary sacrifice agreement cease and it be converted to a net deduction? 

This would need to be looked at quite carefully. HMRC can challenge the validity of salary sacrifice arrangements which “switch” between a reduction to pay (a salary sacrifice) and the employee paying for the car via payroll out of net pay. This may create a problem for the entire scheme not just in relation to the individual concerned.  We would recommend that this is discussed with your benefit provider. 

Q12. Where a salary sacrifice arrangement is converted to a net deduction and paid over to a third party, is the whole amount classed as a benefit in kind at this point? 

Where the employer continues to provide the benefit which the employee previously salary sacrificed from their gross pay - but is now being paid from their net pay - the provision of the benefit in kind will still need to be reported on a P11D. However, the amount deducted will likely be regarded as 'made good' by the employee.  

As noted in the previous question, care needs to be taken where salary sacrifice arrangements are changed during the benefit period to net pay arrangements. HMRC salary sacrifice guidance refers to a permanent change to an employee’s terms and conditions specifically in relation to their pay. Arrangements which move from salary sacrifice to net pay should be carefully considered with specific advice taken. 

Q13. What happens when someone moves to half pay sickness or goes on maternity leave and has a salary sacrifice arrangement in place? 

When a worker goes off on sickness absence and is receiving enhanced sick pay, i.e. not just statutory sick pay (SSP), a salary sacrifice can continue to be taken from the enhanced pay, but only if there is sufficient pay to do so. A salary sacrifice cannot legally be taken from statutory pay, as this would reduce pay below the statutory minimum payments.  Any salary sacrifice arrangements in place during periods of reduced or non-paid absences would need to be suspended or stopped until the employee returned to work. It is usual for this to be considered at the time the benefit arrangement is first put in place. 

Where non-cash benefits are provided to employees on maternity leave, you will need to consider whether there is a legal requirement to provide that benefit regardless of the ability to reduce the employee’s salary.  

Q14. What action can be taken to manage salary sacrifice arrangements when NMW increases cause staff to fall below the threshold, particularly where providers do not allow contract extensions to reduce monthly costs? 

The arrangement must be adjusted immediately to remain compliant. This could involve reducing or suspending the salary sacrifice, topping up pay or moving deductions to net pay so gross salary remains above NMW (subject to previous answers re the overall validity of the salary sacrifice arrangements).  

Where providers do not allow contract flexibility, employers may need to end the arrangement early (although there may be early termination costs to consider). To avoid future issues, it’s important to build flexibility into agreements, assess affordability upfront, and clearly communicate any changes to employees. 

Q15. What are the rules around re-entering staff into salary sacrifice schemes following a pay award, particularly where employees were withdrawn due to falling below the NMW? 

Salary sacrifice requires a permanent change to an employee’s contractual pay so arrangements which allow employees to opt-in and out can be challenged by HMRC. Again, we would expect that these circumstances to have been considered when the scheme arrangements were first introduced. We would recommend that you take specific advice if this is an issue.  

Q16. Where staff are required to travel as part of their role, and are eligible to opt for an employer subsidised lease car, would the lease payments reduce NMW pay? 

Whilst the leasing of a car through the NHS trust leasing scheme is not a clear requirement of the role (as they could get a car from another source), HMRC may challenge any costs or expenses associated with travelling as part of the role where the workers contract clearly states that 'appropriate means to travel as part of their work' is required.  The risk increases where the trust leases the car and makes the car available to the employee.  

In the scenario where the employer provided car is not a specific requirement of the role, a net deduction will still reduce NMW pay where the payment is for the 'own use and benefit' of the employer. This is likely to be the case where the leasing arrangement/liability for the car is contractually between the NHS trust and the car provider. Where the leasing arrangement and liability lies between the worker and the third-party car provider (for example NHS Fleet Solutions) and the employer is acting as a conduit passing payment from worker to third party - it will not reduce NMW pay.  

Q17. If employees buy additional leave, does this reduce NMW pay? 

Where a deduction is made for the purchase of additional leave (or indeed, a pay reduction is made through a salary sacrifice arrangement) it will reduce NMW pay in the pay reference period where the deduction is taken. 

Q18. Does the NHS pension deduction reduce pay for NMW purposes?  

The NHS pension payment by an employee does not reduce NMW pay.  

If an employer operates a pension arrangement on a salary sacrifice basis, then it will reduce NMW pay. This could potentially apply for employees who are not eligible to join the NHS Pension Scheme.   

A salary sacrifice arrangement will always reduce pay. If the pension is taken by way of a deduction from pay (gross or net) which is not a salary sacrifice arrangement, then it will not reduce NMW pay.  

Q19. If employees choose to apply for an annual pass for a bus season ticket (a voluntary scheme) does the recovery of the cost reduce pay?  

Where a worker chooses to sign up for a travel season ticket with a third-party travel provider - the liability lies between the worker and the third party. Where the worker is unable to pay the full amount of the season ticket up front, it can be common for the employer to loan the amount to the worker for the full payment and recover it across the course of the year.   

Genuine loans and pay advances will not reduce NMW pay - however, they should be clearly evidenced by a written arrangement signed by all parties. 

If the employer was to purchase bulk season tickets directly from the provider and then recover the cost from employees via a payroll deduction, this would reduce NMW pay.   

Q20. Some trusts deduct an admin charge for DBS applications. Would this deduction reduce NMW pay? 

If a DBS check was a pre-requisite of the employment, then the charge would not reduce NMW pay. However, if an administration fee/charge was deducted this would reduce NMW pay. 

Q23. What is the impact on NMW pay when a deduction for accommodation is taken from net pay? 

If the deduction is more than the accommodation offset rate, then the 'excess' reduces NMW pay, e.g. 30-day month accommodation charge is £600 – deduct the accommodation offset amount (using rates as at 1/4/2026) of £333 (£11.10 x 30 days) leaves £267 being applied as a deduction to pay when calculating NMW compliance.  

Q24. Does a recovery of an overpayment of wages reduce NMW at the point it is recovered? 

No, a deduction made to pay to recover an overpayment of wages does not reduce NMW pay.  

Q25. If a trust outsources payroll to another organisation for example, another trust or other third-party trust. Who is liable for any NMW breach? 

Ultimately, the employer is responsible for ensuring that all workers are paid at least NMW for all hours worked and to maintain sufficient records to evidence this.