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Understanding the Accommodation Offset Rule – Don’t be caught out?

  • 9th July 2024

As an employer, you're likely familiar with the national minimum wage rates that apply when employing workers.

However, you may not be aware of the accommodation offset rule, which comes into play when you also rent accommodation to your employees. This rule is applicable regardless of whether you deduct the rent directly from their wages or if they pay under a separate agreement. It is essential to comply with this rule to avoid being caught out and ensure your employees are compensated fairly.

The accommodation offset rule states that the rent payment cannot bring the employee's wages below the national minimum wage. To help you better understand this rule, let's look at an example.

Consider an employee, aged 30, who works 40 hours per week at a rate of £12.50 per hour. The rent paid by the employee is £125 per week. The total gross pay for the week would be £500. According to the accommodation offset rule, the offset rate is £69.93 per week. To calculate the adjusted gross pay, follow these steps:

Subtract the rent paid by the employee from the total gross pay: £500 - £125 = £375

Add the accommodation offset rate to the result: £375 + £69.93 = £444.93

When we divide the adjusted gross pay by the number of hours worked (40), we get an hourly rate of £11.12. This falls below the minimum wage rate of £11.44 for this age group. In this case, the employee would need to be paid an additional £12.80 (£11.44 - £11.12 x 40 hours) to meet the minimum wage requirement.

To avoid being caught out by the accommodation offset rule, employers must ensure that the rental arrangements they offer don't result in their employees receiving wages below the national minimum wage. Keep the following tips in mind:

  • Calculate the adjusted gross pay by considering the accommodation offset rate.
  • Ensure the adjusted gross pay is equal to or higher than the national minimum wage.
  • Adjust employees' wages if the rent arrangement brings their pay below the minimum wage

By following these steps and being mindful of the accommodation offset rule, you can maintain a fair working environment for your employees and avoid potential legal repercussions for non-compliance. A happy workforce is key to a successful and thriving business.

If you would like to discuss this further, please do not hesitate to contact us.

Read more on: Agriculture

Written by: Toni Beecroft

All data and figures referred to in our news section are correct at the date of publishing and should not be relied upon as still current.