The sleep-in crisis: Care home providers face difficult decision

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The sleep-in crisis: Care home providers face difficult decision

12 Feb 2018

Following months of suspension, in November the government resumed the enforcement of the national minimum wage (NMW) on healthcare providers with immediate effect. They simultaneously launched the Social Care Compliance Scheme (SCCS) in the hope of alleviating the short-term impact of its decision. Organisations already under investigation for breaching NMW legislation are now receiving letters from HMRC, giving them a 30-day ultimatum to join the scheme.

Here, Mark Clayton, employment solicitor for Kuits, offers his thoughts on what organisations should do:

Background

Following a series of high-profile employment tribunal decisions, HMRC changed its stance on the NMW applicable to care workers doing “sleep-ins”. Previously, social care providers would pay carers a nominal wage for overnight shifts, during which they would be allowed to sleep but required to respond to residents requiring assistance during the night. Social care providers are now obliged to account for the discrepancy between the nominal rates paid for sleep-ins and what carers would have been entitled to had they been paid the NMW for those shifts, to the extent that the shortfall reduces a carer’s overall wage below the NMW. The decision, at least on the face of it, represents a significant victory for carers. But what are the consequences for their employers?

HMRC are able to enforce reimbursement of the underpayment going back up to six years and employees will be entitled to bring claims before an employment tribunal for the same period. A typical care home may have paid as little as a £25 flat rate for a sleep-in, which is around £35 below the NMW for workers aged 25 and over. Consider a carer whose overall wage, as a result, fell under the NMW.

Now calculate the total shortfall of every affected carer in every care home in the UK over the last six years to get an idea of the potential implications of the decision. Initial estimates put the total costs at around £400 million.

What is the impact on care home providers?

Mencap, a leading UK learning disability charity, have started paying the minimum wage for sleep-ins, but believe that the back pay is unaffordable. They fear that it will incapacitate the “already chronically underfunded” care sector and expect many providers will have no choice but to close. Not only could this have a devastating effect on the residents of such care homes, but it could conversely have repercussions for the very carers that it purports to protect, many of whom may face displacement or redundancy.

What has been the government’s response?

Last year, the government waived further penalties for underpayments arising before 26 July 2017 in a bid to reduce the impact on care home providers amid fears for the long-term viability of the sector. The government also announced the introduction of the SCCS. The scheme, which care providers can opt in to, will provide participants with more time to identify what they owe to workers with assistance from HMRC. At the end of this self-review period, employers will have three months to pay workers the amount owed under the new rules. Declarations must be made by 31 December 2018 and payments made by 31 March 2019 at the latest. Employers that choose not to opt in to the scheme will be subject to HMRC’s usual powers of enforcement, which include fines and public shaming.

Should care home providers join the scheme?

Some will welcome the additional time allowed for by the government, whilst others warn that those opting into the scheme could be “writing their own suicide notes”. Before making a decision, employers should consider the following points:

1. Legal position – It may be worth waiting for Mencaps’ forthcoming Court of Appeal case, challenging the legal position, which is due to be heard in March 2018. There is a startling lack of clarity in the current guidance and it is hoped that the appeal will shed some much needed light. In particular, care home providers need answers to the following questions:

i) Do all sleep-in shifts qualify? – The HMRC guidance (found here) includes a somewhat confusing section concerning the requirements that sleep in-shifts will have to satisfy in order to be subject to the NMW, referencing conditions that do not appear to reflect the legal position. Care home providers will require further clarity if they are to assess the correct level of their liability.

ii) What is the period of assessment? –There has been much talk of claims stretching back over a period of six years, but the government announcement did not confirm the length of the period to which the self-review is subject.

iii) From what date should care providers count back? – Is it from the self-review date? If so, for those who have already updated their sleep-in policies, it might make sense to join the scheme as late as possible.

2. Government contribution – Will the government give in to pressure and contribute to the reimbursement? It is perhaps noteworthy that it is currently liaising with the European Commission to determine whether any such financial assistance would be subject to state aid rules.

3. The costs of the self-assessment – A detailed assessment of the total back payment due is a considerable undertaking, particularly for large employers. They may also run into legal issues where employees were transferred to them under TUPE without the necessary information from former employers that may no longer be in operation. This must all be budgeted for before any verdict is reached and may affect decisions regarding how the business is run in the future.

Our advice

Amid the haze of uncertainty surrounding the sleep-in crisis, what is clear is that care providers should assess the approximate value of any potential back pay liability and make appropriate plans in the event that the full liability becomes due. It may be that organisations already subject to investigation have little choice but to join the scheme in order to buy more time to assess their liability and obtain clarification on the key issues. To those not yet subject to investigation, we recommend that they think carefully before voluntarily joining the SCCS.

If you would like any advice on any of the issues raised in this article, please contact Mark Clayton on 0161 838 7806 or at markclayton@kuits.com.

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