On 26 July 2017 the Government announced that it had temporarily suspended enforcement activity and that it was officially waiving historic financial penalties owed by employers who have underpaid their workers for overnight sleep-in shifts before this date. It has also prevented HM Revenue & Customs (“HMRC”) from pursuing social care charities over any historical payments (i.e. those that should have been made prior to 26 July 2017) until a new approach is agreed. On 28 September 2017 the Government announced that the suspension would be extended by another month.
This action follows recent calls by a number of social care providers which assert that the national minimum wage (“NMW”) threatens the stability of the sector and may prove the undoing of numerous providers that cannot cope with ensuring workers are given the NMW for sleep-in shifts. This is a common-place shift or form of work in the social care sector whereby an employee sleeps at their workplace so they are available to support other people during the night, should the need arise.
Previously, it was common practice for care sector workers to be paid a fixed allowance for sleep-in shifts which would often fall short of NMW requirements. This resulted in a number of claims being issued in the Employment Tribunals which culminated in a collective appeal on whether care workers’ sleep-in shifts constituted work that attracted a compulsory payment of the NMW. Collectively, these cases, and in particular the case of Royal Mencap Society v Tomlinson  confirmed that sleep-in shift workers were entitled to be paid the NMW.
Unfortunately, the cases have also failed to provide clear guidelines as to what exact type of sleep-in shift constituted work that would attract a NMW payment. Instead the Tribunal identified factors that would be indicative of this whilst asserting that no single factor is to be determinative and that the relevance and weight of particular factors would vary with and depend on the context and circumstances of the particular case in question. As guidelines, the Employment Appeal Tribunal did indicate that the following would play a role in determining whether sleep-in shifts should be taken into account in the NMW calculation:
- the employer’s purpose such as having someone present due to regulatory or contractual requirements;
- the extent to which the worker is restricted by the requirement to remain on the premises including whether disciplinary action would ensue if they were to leave;
- the degree of responsibility of the worker i.e. contrasting a duty to simply make an emergency services call with the position of a night sleeper in the home of a disabled person with a more significant personal responsibility in relation to the night duties that might have to be performed; and
- the immediacy of the need for the worker to provide services or intervene if something untoward occurs or an emergency arises.
As a result of that finding Mencap were also ordered to pay their workers additional pay for shifts going back as far as 6 years to bring the pay in line with the NMW. This has had ramifications for many social care providers which now face the threat of financial penalties. Repayment of arrears of wages owed to workers who have been underpaid may also be payable following the investigations that HMRC are carrying out into the sector. This is significant as the financial payment of the latter is usually 200% of any arrears found.
Following this ruling Mencap, unsurprisingly, has been particularly vocal about the losses the sector is set to suffer (with some estimations coming in at over £400 million). When taken in context, the outrage from social care providers is understandable when one considers the numbers. Comparatively, a typical 8 hour sleep in-shift payment, which had long been the norm, would cost between £35 to £45 per shift. The same shift using the standard NMW calculated (with the NMW standing at £7.50 per hour) will set an employer back £60. As a bare minimum that is an increase of 25% or more that the employer will now have to pay, or face further fines from HMRC.
The Government has now sought to balance these concerns whilst ensuring that workers in the sector are set to receive the NMW. Waiving the historic financial penalties owed by employers is a significant stride towards the Government reinforcing their support for the social care sector and supplements the already allocated £2billion of funding to the sector (as announced in the Spring Budget). The guidance also reiterates that the area is to be kept under constant review to ensure that the NMW does not play havoc upon providers and that they are kept afloat despite the recent rulings.
Despite this, the announcement is more of a stop gap rather than a direct answer to the problem many employers may face in the future. Any arrears of wages occurring after 26 July 2017 will be subject to investigation from HMRC and employers may still face financial difficulties as a result.
Whether the balancing act will succeed is anyone’s guess however due to the sensitive nature of the sector many care providers need to have workers around the clock or for them to be on standby 24 hours a day. This makes it likely than more often than not employers will struggle to come to terms with this new status quo unless the Government supplements payments for care providers so as to include the additional costs they now face in light of the NMW.