Salary sacrifice pensions and the National Minimum Wage (NMW)

How salary sacrifice deductions can affect the NMW and National Living Wage (NLW) in Sage 50 Payroll.

When an employee has a salary sacrifice pension, sometimes the deduction reduces their pay below the NMW.

Salary sacrifice must not:

• Cause earnings to fall below the NMW or NLW as applicable
• Apply automatically - employees must give written consent

The NMW check in your software doesn't include salary sacrifice pension deductions. If any employees have a salary sacrifice pension, check it doesn't take their pay below the NMW or NLW for their age.

 TIP: You can configure your software to include non-pension salary sacrifice deductions in the NMW check. For example, deductions such as a cycle to work scheme. 

If you're not certain of the NMW and NLW rates, ▼ check them in your software.

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Check employees pay

Calculate the hourly rate after any salary sacrifice deductions for the employees you'd like to check. ▼ View an example.

If any employees' hourly pay is below their minimum rate, continue to the next section.

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Employees below the minimum

If any employee's pay is below the NMW or NLW for their age, you need to resolve this.

 NOTE: If you're not sure what to do to resolve this issue, contact ACAS for advice. Alternatively, if you know what you need to do but need help with processing it in Sage 50 Payroll, contact Sage technical support. 

Depending on the employee's contract and your salary sacrifice pension arrangement, possible options include:

• Amend the employee's pension contributions so their pay is compliant
• Move the employee to a non-salary sacrifice pension scheme. For help with moving an employee to another scheme, follow the how do I assign a different pension scheme to an employee article

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