National minimum wage breaches leave care workers £130m out of pocket

Care workers are losing out on £130m a year due to employers’ failure to comply with national minimum wage standards, according to a new study.

The study found approximately 160,000 of the UK’s 1.4m care workers are being paid less than the minimum wage, equating to an average loss per person of £815 in 2013-14.

Independent think-tank, the Resolution Foundation, said the ‘wage theft’ was due to staff not being paid for the time spent training, being on call and travelling between clients.

Workers also lose out due to illegal deductions from pay, such as the cost of uniforms, but it was not possible to account for these in the estimates, the foundation said.

Laura Gardiner, senior research and policy analyst at the foundation, said: “Every worker has the right to the minimum wage yet illegal non-payment is all too common in the sector.

“Diminishing public funding and ever tighter commissioning practices are placing pressure on social care providers, but there is simply no excuse for breaking the law.”

Illegal pay

The study found that receiving wages below the legal minimum were also having a knock-on effect on care workers’ retirement savings.

Researchers estimated a total of £4m was missing from pension pots each year, assuming employers make an extra contribution of 3% to workplace pension schemes.

If pension schemes offered by employers are more generous than 3%, workers not being paid the minimum wage will lose out even more.

The breaches also mean the government is missing out on tax revenues – if the missing £130m had been paid to care workers during 2013-14, HMRC would have collected an additional £9m in national insurance contributions alone, the study found.

Sector concerns

HMRC has recently stepped up its focus on social care and in a recent investigation, it ‘named and shamed’ 37 providers for failing to comply with minimum wage standards. It has also had its budget increased by £3m to investigate such companies.

However, the Resolution Foundation has called on the government to “get even tougher” with employers.

Gardiner pointed out social care would need up to a million extra care workers over the next decade to meet the needs of an ageing population.

“Tackling the broader issue of low pay in this sector is a real priority. If we want to see dignity for those receiving care then we need to start investing in the workers who provide it.”

Colin Angel, policy and campaigns director at the United Kingdom Homecare Association, said: “While the foundation’s estimates of the size of underpayment to affected workers are significantly higher than those found in practice by HMRC, their calculations add to growing concerns that the sector is struggling to offer appropriate terms and conditions to frontline workers.”

David Pearson, president of the Association of Directors of Adult Social Services, added: “Adass does not condone law breaking and it is the responsibility of employers to arrange pay conditions that are within the law.

“However, the Care Act requires local authorities to develop a high quality, sustainable market and one in which staff are paid and trained appropriately by providers. Local authorities will have to be assured staff are paid at least the minimum wage.”

The study is part of a wider investigation by the foundation into improving pay and conditions for care workers, due to conclude in March.