Case Study - National Minimum Wage Knowledge Development

Scene setting

A large UK logistics business discovered during a self-review that they had underpaid NMW to workers participating in various salary sacrifice schemes, including pension, holiday purchase, cycle-to-work, and childcare vouchers.

The underpayments affected a small number of employees, but the business needed urgent support to correct the errors and implement robust processes to prevent future breaches.

The action

We began by conducting a thorough review of all salary sacrifice agreements, including the pension scheme, and worked closely with the payroll manager to assess their current NMW calculation processes. We recommended alternative procedures to ensure accurate NMW compliance going forward.

During the review, We identified a critical issue: the business offered a holiday purchase scheme via salary sacrifice, and when this caused an NMW breach, they were switching the deduction to a net deduction. The team was unaware that this approach still reduced NMW pay, resulting in additional underpayments spanning the previous three years that had gone undetected.

We collaborated with the payroll team to:

  • Calculate historical NMW underpayments for all affected workers
  • Determine the required uplift amounts
  • Develop solutions for continuing to offer holiday purchase schemes to employees earning closer to NMW rates

The business repaid all underpayments to current and former employees. Since this was corrected outside of an official NMW investigation, no penalties or naming resulted.

The results

The payroll team implemented new, robust processes for conducting NMW calculations using a bespoke calculation checklist we created.

The business now operates with confidence that their salary sacrifice schemes are NMW-compliant, preventing costly errors and protecting both workers and the business from future underpayment risks.

The team's enhanced NMW knowledge means they can identify and address potential issues proactively, rather than discovering them retrospectively