Court rejects review of new travel expenses law

A judicial review into the Government’s decision to stop travel expenses for journeys to a temporary place of work from counting towards the calculation of the National Minimum Wage has been rejected today by the Administrative Court.

Mr Justice Kenneth Parker ruled that the Government’s proposed legislative amendment to the National Minimum Wage Regulations was not unlawful, irrational or disproportionate. He also refused leave to Cordant Group plc, which has a number of staffing companies as subsidiaries, to appeal his decision.

As a result of the decision the amendment will come into force as planned on 1 January 2011. It does not outlaw the claiming of travel expenses to a temporary workplace, which can continue to be paid gross subject to the usual tax rules. However,  these expenses will no longer count towards the calculation of the national minimum wage.

The ruling and new law probably also affect subsistence and accommodation expenses, as this appears to be the intention. However an interpretation of the new law could be that travelling expenses are regarded separately from subsistence and accommodation leaving these expenses still capable of counting towards NMW. Some umbrella companies that employ agency workers paid at the lower end of the pay spectrum are likely to focus more on this area, although to apply it in the absence of a new ruling could be a high risk strategy given the government’s policy intention. In any event the overall result could be a lower net sum in the pay packet of the employee.

Should you require any information on the ruling or on the operation of travel expenses schemes please contact Lawspeed.