It also claims they are 'over-complicated' and discriminate against low-paid staff.
The nursery is one of 37 employers featured on the Department of Business, Innovation and Skills' (BIS) 'naming and shaming' list for neglecting to pay members of staff NMW.
It followed an investigation by HMRC into the administration of the nursery's childcare salary sacrifice scheme. As a result of the investigation, the setting was fined for deducting additional childcare fees owed by some staff taking up their salary sacrifice scheme from net pay.
Because HMRC rules dictate that a salary sacrifice arrangement cannot reduce an employee's cash earnings below NMW, the nursery agreed with some staff getting lower salaries that the additional fees they owed would be taken from their take-home pay. However, the nursery says it was unaware that as an employer it cannot make a claim on employees' net pay, only their gross pay.
The nursery is now appealing to be removed from the 'naming and shaming' list as it says HMRC's rules are hard to access, and being on the list could cause serious harm to its reputation.
A spokesperson for the nursery said, 'We believed that we were operating our childcare subsidy scheme within HMRC rules.
'We approached our legal and tax advisors about whether administrating the scheme in this way could present a possible breach of legislation, but they confessed to knowing little about the issue as HMRC regulations are buried so deeply in its literature.
'This happened a year ago. Our initial punishment had been proportionate and effective. We were fined by HMRC, repaid the "underpayment" in net salary to those staff concerned - none of whom believed they were underpaid in the first place, reclaimed the money staff owed us for childcare fees, and put a new process in place to prevent future transgression.
'Then the "naming and shaming" blacklist appeared. What was its intended effect?'
The nursery no longer offers a salary sacrifice scheme for discounted places, which it says is to the detriment of staff, particularly those on low pay.
The spokesperson said, 'Members of staff were more than happy and fully aware that we were to take what they owed from their pay. In some cases, the staff affected had requested for us to take the fees they owed so they would know what they had left to spend each month after their childcare bill had been settled.
'Staff at or close to the NMW level could reasonably claim to be discriminated against on the basis that they are not able to access the same benefits as their higher paid colleagues.'
A BIS spokesperson said, 'It is illegal to pay below NMW and employers cannot use expenses, or payments in kind to fund NMW. This is the basic rate of pay and any expenses or other benefits such as uniform, tools, or transport, must be paid on top to comply with the law.
'If an employer makes deductions from the workers' pay, this does not count towards the NMW calculations. It does not matter whether the worker agrees to the deduction or not.'
The two childcare settings on the Government's 'naming and shaming' list were ABC Early Learning and Childcare Centre in Wolverhampton, and Kingsclere Nurseries.