Some of the large hospitality operators provide accommodation for their staff as part of the National Minimum Wage and Living Wage when running payroll.
Hence, it is important for employers to understand the effect that accommodation offset rates can have on the NMW and the NLW.
The GOV.UK website contains daily and weekly accommodation offset rates for previous years (e.g. before the current tax year).
Note: No other company benefits count towards the minimum wage (e.g. childcare vouchers, a company car, or food). But, you can use the minimum wage calculator to check payments.
Your overall accommodation charges can include things like:
For purposes of offset rates, an employer will be 'providing accommodation' if they (any):
Important: The accommodation costs would count towards the National Minimum Wage or National Living Wage even in circumstances where the worker does not need to live in it to carry out the job. But, it only counts as a cost if the worker uses it, in cases where the employer provides it as 'optional' accommodation.
Working for a local housing authority (or social housing provider) means you may get accommodation from the work. Even so, it would not count towards the National Minimum Wage or National Living Wage by automatic process.
However, it would count if it was linked to the employment. A typical example would be a care warden who needs to live on site and has a place to live 'linked' to their job.
The accommodation would not count when working out the National Minimum Wage or National Living Wage if a higher or further education institution provides it to a worker enrolled on a full-time course at the same facility.
Note: You can use the Acas pay and work rights helpline and complaints department to get further information about workers' rights and their responsibilities in the workplace.
As a rule, it is the amount employers charge for accommodation rates that affects the National Minimum Wage or the National Living Wage.
The calculation uses a 'pay period' - being the intervals that the worker gets paid. In most cases, it is weekly or monthly. But it can also be irregular intervals (e.g. every ten days).
It is not uncommon for accommodation to be free as part of the employment. Even so, it would still have some effect on the minimum wage (e.g. an offset rate of £8.20 per day).
Note: It would not matter if the accommodation cost is deducted from the worker's wages 'beforehand'. The same would also apply if the worker pays the cost after receiving their wages.
Example 1: Employer Provides Free Accommodation
Robert is 27 years old and receives £7.50 an hour (below the National Living Wage). He works a total of thirty (30) hours a week and his pay period is every seven (7) days.
He gets free accommodation seven (7) days a week from his employer - bringing his pay up to £9.41 an hour (above the National Living Wage).
So, the calculation in this example would be £8.20 (offset rate used when accommodation is free) multiplied by 7 (representing the days accommodation provided in pay period) = £57.40. Then, £57.40 + (£7.50 × 30 - the total pay in reference period) = £282.40. The final part is £282.40 ÷ 30 (total hours in pay period) = £9.41.
Example 2: Employer Charges Accommodation Below the Maximum Rate
Julie is 23 years old and receives £8.30 an hour (above the National Minimum Wage). No offset rate is applied because her employer charges £3.50 per day for accommodation (below the threshold).
As a result, the accommodation charge in this example would not affect Julie's pay of £8.30 an hour.
Example 3: Employer Charges Accommodation Above the Maximum Rate
Ben is 35 years old and he gets 8.76 an hour (above the National Living Wage). He works forty (40) hours a week and his pay period is every three (3) weeks.
He gets £8.50 per day for accommodation from his employer and he lives in it full time (21 days for his pay period) - bringing his pay down to £8.71 an hour.
The calculation in this example would be £8.76 (hourly rate) × 120 (total hours in pay period) = £1,051.20. Then, £8.50 (accommodation rate) × 21 (days accommodation provided in pay period) = £178.50.
The next step is to multiply £8.50 (accommodation rate) by 21 (days accommodation provided in pay period) which makes £178.50. Then, £8.20 (offset rate used when accommodation is free) × 21 (days accommodation provided in pay period) = £172.20
To finish, £1,051.20 (total pay in pay period) – £178.50 (total accommodation cost in pay period) + £172.20 (total accommodation offset in pay period) = £1,044.90. Thus, £1044.90 ÷ 120 (total hours in pay period) = £8.71.
Note: Another section explains more about PAYE for employers, how to run a payroll system, and how to keep proper records for HM Revenue and Customs.
Payroll Minimum Wage and Living Wage Accommodation Offset Rates