Navigating the complexities of employment regulations can be challenging, especially when it comes to understanding how wages and salaries are calculated. In the UK, there are distinct differences between the national minimum wage and the minimum salary requirements for work visas. This article clarifies these differences to help you make informed decisions.
National Minimum Wage Pay
The concept of national minimum wage (NMW) pay is more complex than a set legal minimum rate. Rather, it is a calculation underpinned by specific rules that define what counts towards the minimum and what does not. In other words, not every pound paid is automatically included in the NMW calculation for all workers, and employers must understand this nuance to ensure legal compliance and avoid costly misunderstandings.
National Minimum Wage Pay Calculation
The NMW calculation requires employers to identify three key aspects:
- The correct worker type for each population based on their contract of employment
- Qualifying pay
- Qualifying deductions from pay
Under the NMW regulations, each of the four worker types has different criteria when calculating pay. The only pay that will always be considered as qualifying NMW pay is basic pay before any enhancements, such as premium rates or allowances.
In addition to qualifying pay, employers must also have an understanding of qualifying deductions that may impact NMW pay. Whilst statutory deductions such as income tax and National Insurance don’t reduce NMW pay, there are a number of deductions that can impact NMW qualifying pay.
Common deductions that can reduce pay include:
- Salary sacrifice arrangements
- Car park permits
- Administrative fees
- Costs for items purchased from employer
Even if a deduction provides a clear benefit to a worker, employers must ensure that deductions from pay don’t reduce pay below the legal rates. Understanding how a deduction impacts NMW pay is essential for ensuring NMW compliance.
Minimum Salary for UK Work Visas
The UK offers a variety of work visas for a range of qualifications and job roles. The skilled worker visa, for example, is issued to highly skilled workers from outside the UK who have a job offer from a UK employer for a skilled job. To be eligible to apply for this visa, applicants must be issued a certificate of sponsorship by a licensed UK employer. Under 2025 regulations, individuals must earn a minimum salary dictated by their role and experience to qualify for this visa.
For skilled worker visa purposes, only guaranteed basic gross pay counts towards the minimum salary. This includes salary before tax, employee pension, and national insurance contributions. Most other allowances, pay, or benefits—even if guaranteed—are excluded (noting that those who entered the skilled worker route historically may be able to rely on transitional arrangements that can alter which amounts can be included in their salary).
This means that the following are excluded from the calculation:
- Fluctuating pay due to varying hours
- Additional pay, such as shift allowance, overtime, or bonuses
- Employer pension and national insurance contributions
- Allowances such as accommodation or cost of living
- In-kind benefits like equity shares, health insurance, school fees, company cars, or food
- One-off payments, such as “golden hellos”
- Payments related to immigration costs, such as application fees or the Immigration Health Charge
- Business expenses, including travel, equipment, clothing, or subsistence
Deductions from Worker’s Salary
When determining if a worker’s salary meets the applicable work visa thresholds, any payments the worker is required to make to the employer or a related organisation are subtracted. This includes:
- Deductions related to business costs, immigration costs, or investment
- Repayments of loans related to business costs, immigration costs, or investment
- Investment in the employer’s (or a related) organisation
These deductions are averaged over the sponsorship period. However, money is not subtracted if it's an additional benefit offer, like a salary sacrifice arrangement, which the worker can choose to take up, but this must not result in pay falling below the NMW.
BDO Can Help
Understanding the differences between the NMW and the minimum salary requirements for work visa purposes is crucial for compliance and ensuring that your workers are compensated correctly.
For more information on the national minimum wage or the minimum salary requirements for UK work visas, please consult your regular BDO contact or the author of this article.
Danielle Mapp
Siobhan Waters
BDO in United Kingdom