Iceland in frosty wage – Dispute with HMRC

Iceland Foods are in a dispute with HMRC over the company’s Christmas savings scheme.

In this salary sacrifice-type scheme, staff can voluntarily set aside part of their wages throughout the year and claim it back later, usually at Christmas.

HMRC asserts, however, that some employees in the scheme are technically paid less than the National Minimum Wage (NMW).

Iceland are fighting the assertion. The dispute is in its early stages but we’re eager to see how it develops. If Iceland lose, they could have to pay up to £21m to the affected employees.

Legal opinion

Salary sacrifice schemes are common; another example would be childcare voucher schemes or enhanced pension contributions. These forms of remuneration are not part of an employee’s contractual salary, and therefore do not count for NMW purposes. Some organisations have started to withdraw their salary sacrifice schemes for fear of falling below the NMW requirements.

The Government is carrying out a consultation on salary sacrifice schemes as part of its project to upgrade workers’ rights. It acknowledges that the rules and legislation are complex and says changes could be made to make them easier to understand.