On Tuesday the government published their proposed amendments to the travel and subsistence expenses scheme for workers receiving the National Minimum Wage.
As from the first of January next year, the payment of travel expenses to a temporary workplace will no longer count as pay for National Minimum Wage purposes.
This news was welcomed by the REC which has been calling for clarity on the issue for several years.
Some unscrupulous umbrella companies have been exploiting the existing scheme by paying their employees less than the National Minimum Wage and then making up the difference with travel allowances or tips. This saved the employer paying employer’s NICs on the expenses related portion of the employees’ remuneration. Although this also results in the employee paying lower tax and NICs, it means that some are unable to access benefits that are earnings related, such as basic state pension.
The government identified that this system was unjust and began a consultation which received 54 responses. One respondent pointed out that under the current system, a worker may gain £5 a week but the Employment Business can benefit by £30 to £45.
The new system is designed to create a level playing field and prevent the exploitation of low paid workers, many of whom are migrant workers who sign contracts that they do not fully understand.
During 2009, there were around 1.3 million temporary workers in the UK according to the Labour Force Survey. About 25% (350,000) of these temps are paid at or near the National Minimum Wage rate. Of those, around 90,000 will have their pay calculated using a travel and subsistence scheme. Amending the regulations will protect the rights of these 90,000 workers.
Crystal Umbrella also welcomed the news, stating that they have campaigned in this area for a long time. In their opinion, it will ensure that all umbrella companies have a level playing field, whilst at the same time protecting the most vulnerable people who employed through them.
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