Social care sector and the Minimum Wage
There has been a great deal of uncertainty regarding payment to carers of the National Minimum Wage and the National Living Wage (the “Minimum Wage”) in the social care sector recently, specifically regarding working time for those employees who are required to sleep in the home of patients as part of their shift.
Prior to recent activity in the employment Law courts, it had been generally accepted within the social care sector that where a care worker was required to sleep in the home of an individual who needed their support (so they would be available to care for that individual if they required any assistance during the night) that any time spent asleep, would not count as working time for Minimum Wage purposes. As a result, most organisations continued to pay their employees a flat-rate “on call” allowance, which pre-dated the Minimum Wage legislation, for any sleep-in shifts performed.
Following the decisions of an employment tribunal in 2016 and a 2017 employment tribunal appeal, it was held that every hour of a sleep-in shift – even when the carer is sleeping – should be counted as working time for Minimum Wage purposes. These cases set a precedent, and left employers in the social care sector facing significant additional payments on the basis that they had effectively underpaid their workers the correct wage for sleep-in shifts, as the flat rate allowance paid was lower than the Minimum Wage thresholds.
THE TAX POSITION
Following the rulings, employers who paid the flat allowance rate for sleep-ins were then deemed to be non-compliant not only with Minimum Wage legislation, but also with PAYE and NIC regulations for failing to add the correct amount of wages to payroll. This situation left employers subject to potential additional penalties, and also meant that there was a likelihood that they would have to pay back pay to individuals who had performed sleep-in shifts for the past six years. Based on a conservative estimate of the costs involved in putting things right for the past, the social care sector faced a bill of over £400m.
Mencap, a charity for those with learning disabilities that sometimes requires workers to perform sleep-in shifts, originally appealed against the Employment Tribunal’s decision on how such shifts should be treated for Minimum Wage purposes, due to the potentially severe impact it could have on the social care sector. They were successful in being able to overturn the decisions in July 2018.
In this case, the Court of Appeal found that it was only time required to be spent awake for the purposes of working during a sleep-in that counted as working time for Minimum Wage purposes.
Their revised guidance following the Court of Appeal, produced by the Department for Business, Energy & Industrial Strategy (BEIS), is line with the successful Mencap Appeal and so reflects the current situation, as follows:
- If an employer provides suitable facilities for sleeping, Minimum Wage must be paid for time when the worker is required to be awake for the purpose of working, but not for time the worker is permitted to sleep;
- If suitable sleeping facilities are not provided, then Minimum Wage must be paid for the entire shift;
- Where workers are working and not expected to sleep for all, or most, of a shift, even if there are occasions when they are permitted to sleep (such as when not busy), Minimum Wage must be paid for the whole of the shift.
Although the certainty generated by the successful appeal was positive for the social care sector, the issue has now been thrown back into further doubt as Unison (who represented Mrs Tomlinson-Blake in the Mencap Case) has now been granted permission to Appeal this ruling by the Supreme Court. The case is not expected to be heard until later in 2019 or possibly into 2020.
If the Supreme Court rules against Mencap, it could lead to many employers in the social care sector and other employers who have staff that perform sleep-in shifts having to pay employees for previous years. In addition, HMRC would expect employers to settle any associated tax and NIC liabilities associated with the pay. As the decision on the latest appeal is expected from the Supreme Court in late 2019 early 2020, there will be many employers in the social care sector eagerly awaiting this outcome, to understand what this means for their organisation.
While employers in the social care sector are awaiting the results of the case, they have two options to consider in regards of payment. These are:
Pay carers for sleep-ins shifts according to current BEIS guidance; or
Pay those carers the Minimum Wage outside of the BEIS guidance.
Due to the uncertainty around the case and the decision which will be made, it is difficult to advise employers on the rates employees who perform sleep-in shifts should be paid. On the worst-case scenario, if employers followed the current BEIS guidance, they may inadvertently open themselves up to future penalties if the Supreme Court decides that workers should be paid for every hour at work, regardless of sleeping. These penalties can be up to 200% of the amount owed and employers can be publicly named.
Some employers may want to take a more conservative approach and pay their carers the Minimum Wage when performing sleep-in shifts. This approach would prevent HMRC for levying penalties for the period in which employers pay the Minimum Wage. However, HMRC could still seek to recover any back payments and levy penalties for the period in which they paid employees lower than the Minimum Wage. For any underpayment for previous years (from not paying the Minimum Wage), employers could potentially carry out a “self-correction” process (i.e. putting things right themselves), and there would be no penalties or public naming if this was managed correctly.
For more information on any employment tax related matters please contact either: Lee Muter, Employment Taxes Partner at firstname.lastname@example.org; or Rebecca Kemp, Employment Taxes Consultant, at email@example.com
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