Despite some encouraging comments from the Government, the issue of National Minimum Wage for sleep-in shifts in the Social Care sector appears no closer to being resolved.
Back in 2013, caselaw emerged which confirmed that the hours carers spent sleeping over to be on hand if needed were working hours for which they should be paid NMW. At the time though, HMRC guidance stated the opposite so that those carers were not entitled to NMW when working a sleep-in shift.
As case law in this area developed, HMRC changed tack and issued revised guidance. By this time though, it was a recognised practice within the Social Care sector to pay flat rates for sleep-in shifts.
Budgetary restraints placed on Social Care providers by local authorities means most will have been underpaying NMW for these shifts. The case law also has retrospective effect which means they could be liable for up to 6 years’ underpayment of NMW for anyone who worked for them in that time, a financial penalty capped at £20,000 per worker and being named and shamed by the Department of Business, Energy and Industrial Strategy.
Social Care provider’s exposure to a significant liability led HMRC to announce a temporary suspension on enforcing financial penalties in the sector with effect from 26 July 2017. The suspension was due to be lifted on 2 October 2017 but has already been extended by a further month. This extension has allowed the government to consult with stakeholders to understand how these liabilities may impact the provision of care for vulnerable adults and to explore its options to minimise that impact.
HMRC’s suspension doesn’t apply to repaying the underpayment of wages though. Social Care providers are still accountable for this liability which is estimated to be in the region of £400 million. Enforcing any underpayments could push some social care providers into insolvency creating a social care crisis. At the same though, workers will want to recover their underpayments from somewhere.
An appeal on the entitlement to NMW for sleep-in shifts is also due to be heard in March 2018. Whilst the outcome may overturn the previous decisions it’s probably unlikely as it would lead to a rethink over what is deemed to be non-working time.
This is likely to rest with funding being made available by the government to support Social Care providers who find themselves liable for these underpayments. Those who followed HMRC’s guidance will consider this to be entirely justified. However, paying state aid to private bodies may need approval from the EU Commission. Social Care providers who are affected should join these consultations now to strengthen any case for state aid the government may make to the EU.
Read our latest update following the Government announcement on 1 November.