July 09, 2025
Article
Most employers are aware of their obligations to pay staff at least the National Minimum Wage (NMW) or National Living Wage (NLW). These rates increased on 1 April 2025 and are now as follows:
The following components count towards the NMV:
- Gross salary
- Bonuses
- Commissions
- Incentive payments
- Piecework payments
- Accommodation offset
The first five are straightforward cash payments. The accommodation offset, however, is more complicated and applies when an employer provides accommodation to their employees.
An employer is considered to be providing accommodation if any of the following conditions apply:
- The accommodation is a requirement of the job – including job-related accommodation that may be exempt from benefit-in-kind reporting. See our other recent article on P11Ds https://albertgoodman.co.uk/insights/p11ds-common-benefits
- The employer (or a connected person or company) owns or rents the property in which the worker resides, even if the accommodation is not contractually linked to the job.
- The employer (or a partner, shareholder, or director) receives a payment or benefit from the worker’s landlord or a member of the landlord’s family.
Accommodation is taken into account even if the worker pays rent—whether this is deducted from wages or paid separately under a tenancy agreement.
Accommodation Offset Rates (from April 2025)
Example: Free Accommodation
Paul is 24 and earns £11.60 an hour, which is below the NLW. He works 40 hours a week and receives free accommodation for the full week.
Weekly offset: £74.62
Gross pay: £11.60 × 40 = £464
Total: £464 + £74.62 = £538.62
Effective hourly rate: £538.62 ÷ 40 = £13.46
Paul’s effective rate is £13.46 per hour—above the minimum requirement.
Example: Rent Charged Below the Offset Rate
Harriet is 28 and earns £12.50 per hour, which is above the National Living Wage. Her employer charges £8.50 per day for accommodation, which is below the daily offset of £10.66.
No adjustment is required—Rosie’s pay remains compliant.
Example: Rent Charged Above the Offset Rate Andrew is 35 and earns £12.30 per hour. He works 50 hours a week and is paid every four weeks. His employer charges £125 per week for accommodation.
Gross pay: £12.30 × 200 (50 hours × 4 weeks) = £2,460
Rent charged: £125 × 4 = £500
Offset allowance: £74.62 × 4 = £298.48
Adjusted gross pay: £2,460 – £500 + £298.48 = £2,258.48
Effective hourly rate: £2,258.48 ÷ 200 = £11.29
Andrew’s effective hourly rate is £11.29—below the legal minimum of £12.21.
Conclusion
To avoid inadvertently underpaying staff, employers should regularly review accommodation charges in the context of the NMW. Failure to comply could lead to enforcement action, back payments, and reputational damage