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The accommodation offset rate

If your employer provides you with accommodation, they can count some of its value towards National Minimum Wage (NMW) pay. This is called the accommodation offset. Your employer cannot count more than the accommodation offset rate which is in force at any given time.

From 1 October 2012, the maximum amount your employer can count towards NMW pay as an accommodation offset is:

• £4.82 a day
• £33.74 a week

It makes no difference whether:

• your employer takes rent out of your wages
• you have to pay rent to your employer after receiving your wages
• your employer simply provides the accommodation as part of a package

In all cases, the accommodation offset rate is the most your employer can count towards NMW pay. It also makes no difference whether you could have chosen not to occupy the accommodation. If you do choose to occupy it, the accommodation offset applies.

What counts as providing accommodation?

As well as accommodation itself, any charges you have to pay to your employer for gas, electricity, laundry and furniture are added to the rent for the purpose of calculating the accommodation offset.

The accommodation offset applies where any of the following apply:

• the accommodation is provided in connection with your contract of employment
• keeping your job depends on occupying the accommodation
• occupying the accommodation depends on staying in your job

If someone other than your employer provides your accommodation, but there is a connection between your employer and landlord, your employer will still be regarded as providing accommodation under NMW rules.

Normally, the accommodation offset applies even if there is no connection between the job and the accommodation. There is an exception to this if you work for a social housing provider (a local authority or registered social landlord) and live in accommodation provided by your employer. In these cases, the offset only applies if there is a connection between your job and being provided with the accommodation, eg a care warden who has to live on site.

Other benefits in kind

As well as accommodation, there is nothing to stop your employer providing you with other ‘benefits in kind’ such as a uniform or meals. However, accommodation is the only benefit in kind whose value can be counted towards NMW pay.

Your employer cannot offer the value of meals or a uniform (for example) as part of a package that makes up the NMW. If they deduct a sum representing the cost of meals or uniform from your wages, what is left, allowing for any deductions which the NMW rules do allow, must still on average be at least the NMW.

• Being paid and payslips

Calculating NMW pay when accommodation is provided

How you work out if you are being paid the NMW when your employer provides accommodation changes depending on your circumstances.

Working out the accommodation offset can be complex, so you may want to contact the Pay and Work Rights Helpline.

Before calculating the impact accommodation offset has on your pay, you should read 'Calculating the National Minimum Wage: the basics'. This article will explain some of the basic terms such as 'pay reference period' and 'gross pay'.

• Calculating the National Minimum Wage: the basics

Rent deductions by your employer

If your employer deducts rent from your wages (or you have to pay it to them), you should follow these steps:

Step one: calculate your gross pay over the pay reference period

Step two: calculate the accommodation offset that your employer can apply, then compare it to the rent being charged

If the rent your employer charges you is higher than the offset they can apply, the next steps will be:

Step three: deduct the amount of rent from your gross pay

Step four: then add the applicable accommodation offset

Step five: divide the total by the hours you worked

This will produce your hourly rate of pay for NMW purposes.

However, if the rent your employer charges you is less than the applicable accommodation offset, or exactly the same, then the offset will have no effect on NMW pay. So for you the final step after step two is simply to divide your gross pay by the hours you worked.

Accommodation provided as part of a package

If your employer provides accommodation as part of a package instead of directly charging you for it, you should follow these steps:

Step one: calculate your gross pay over the pay reference period

Step two: calculate the accommodation offset that your employer can apply

Step three: add the applicable accommodation offset to your gross pay

Step four: divide the total by the hours you worked

Example calculation

You're a 22 year old, weekly paid worker receiving an hourly rate of £6.40 for a 40 hour week. Your employer deducts £50 per week for accommodation, which is provided seven days a week.

Step one: calculate your basic pay over the pay reference period (£6.40 x 40 hours = £256 basic pay per week)

Step two: calculate the accommodation offset which your employer can apply (£4.82 daily accommodation offset rate x 7 days = £33.74)

Step three: the amount your employer charges you for rent is higher than the offset they can apply, so subtract the amount of rent from your gross pay (£256 - £50 = £206)

Step four: add the accommodation offset (£206 + £33.74 = £239.74)

Step five: divide the figure by the hours you worked (£239.74/40 = £5.99 per hour)

The amount is below the NMW rate you are entitled to, so you should raise this with your employer or contact the Pay and Work Rights Helpline.

Where to get help

The Pay and Work Rights Helpline gives confidential help and advice on the NMW and can handle calls in over 100 languages. If you are not being paid the NMW contact the Pay and Work Rights Helpline or use the online enquiry or complaint form.

• Pay and Work Rights general enquiry form Opens new window

• Pay and Work Rights complaint form Opens new window

• Pay and Work Rights Helpline contact details