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  • Published:
    28 July
  • Area of Law:
    Employment, Employment Tribunals

HMRC suspends enforcement activity on NMW compliance and sleep-in shifts

In May we reported on the Employment Appeal Tribunal decision that where a care worker was doing time/salaried work, even if they are asleep, they are working.

Over recent years, HMRC's position on this point has fluctuated, leaving care providers in an uncertain position. HMRC had appeared to take the view up until around summer 2016, that only time spent awake and working during a sleep-in shift counted for National Minimum Wage purposes. However, increasingly, providers were faced with an alternative view from HMRC that every hour of sleep-in shift counted for National Minimum Wage purposes, awake or asleep, where there was a requirement for workers to be present during the night and those workers were not allowed to leave during the hours they were carrying out a sleep-in shift.

The Government announced on 26th July 2017 that, with immediate effect, they would waive financial penalties faced by employers who are found to have underpaid their workers for sleep-in shifts in any pay reference period that ended before 26th July 2017. Whilst penalties will be waived, this does not affect wage arrears due to workers in cases where there has been underpayment. HMRC may still therefore issue notice of underpayment in respect of any pay period where non-compliance is found.

HMRC have confirmed their view that if a worker is doing time/salaried work, even where they are asleep, they are, in fact, working where (1) there is a requirement for the worker to be present during the night and (2) they are not allowed to leave during the hours they are required to sleep in.

From 26th July 2017 onwards, the Government has confirmed that care providers should comply with this assessment and ensure that if this is the case for their workers carrying out sleep-in shifts, that they are paid the National Minimum Wage.

The impact for care providers is that they will now have to ensure compliance, either by paying National Minimum Wage for every hour of a sleep-in shift, increasing the flat sleep-in rate so as to ensure that an average of National Minimum Wage is paid across the pay reference period or introduce arrangements to top up payments so as to ensure an average of the National Minimum Wage is paid across the pay reference period.

We had also previously highlighted the possibility that sleep-in shifts could constitute "unmeasured work" under the National Minimum Wage Regulations and agreements could be entered into with staff to this effect, which may reduce cost. However, this argument remains untested before the Courts and therefore there would be an element of risk in pursuing this option.

The Government has also announced that it will temporarily suspend enforcement activity regarding sleep-in shifts until 2 October 2017. The purpose of the suspension is to see how issues of National Minimum Wage and sleep-ins are managed going forward.

The Government has also said that it will continue to work with representatives from the health and social sector so as to minimise any impact on the provision of social care as a result of the need for these National Minimum Wage payments to be made. However, none of these announcements deal with issues of underfunding, which continues to be the biggest threat to the sector and explains why providers will struggle to pay National Minimum Wage for sleep-in shifts.

"This is exactly why we like to work with people who understand the industry and can identify potential issues and create solutions."

Jon Saltinstall, Senior HealthCare Banking Consultant, Lloyds Bank