This week, UK care providers warned that the sector could face collapse, as a result of HMRC chasing them for hundreds of millions of pounds in backdated payments for employees providing sleep-in care services.
For many years, care workers have been paid a flat-rate allowance of around £35 per shift for hours spent sleeping at residential facilities or at service users’ homes, in order to provide on-call care around the clock. But a recent ruling has determined that workers should instead be paid minimum wage for these hours – and HMRC is demanding, by September, back payments of up to six years.
What’s behind the row?
An employment appeal tribunal in May ruled that Mencap must pay a worker the national minimum wage (NMW), as opposed to a fixed rate of £29.05, for sleep-in hours as part of care for two vulnerable adults.
This followed a 2014 case heard by the same tribunal, relating to a care worker supporting three disabled adults in their home, which deemed her to be eligible for the NMW while asleep. Guidance issued in 2015 by the Department for Business, Energy and Industrial Strategy (DBEIS) similarly says: “A worker who is found to be working, even though they are asleep, is entitled to the national minimum or NLW [National Living Wage] for the entire time they are at work.”
But the picture is not 100% clear, with the judge at this year’s employment appeal tribunal emphasising that the factors set out in the Mencap case needed to be carefully considered in relation to different workers’ circumstances. National minimum wage legislation published in the same year as the DBEIS guidelines also says that a worker can only be considered to be “available” when “awake for the purposes of working”.
How much money is owed?
Charities say that the six years of backdated payments sought by HMRC could reach at least £400 million. Additionally, a joint statement provided by care sector representative bodies Learning Disability Voices, Care England and the Voluntary Organisations Disability Group put the total funding gap over the next four years at an estimated £600 million.
Why are charities warning the sector could collapse?
Providers say the care sector is already facing a funding crisis thanks to factors including an ageing population, huge cuts to council budgets and the adoption of the National Living Wage. Research has identified a rise in the number of care providers going bust in recent years while there have been national headlines this year around more providers terminating contracts with councils because the money on offer makes them unviable. Last year the Care Quality Commission, the industry’s regulator, described the sector as being at a “tipping point”.
What happens next?
Care sector bodies are calling on the government to immediately suspend HMRC’s enforcement activity until the law is clarified, and publicly fund back pay liabilities if the Court of Appeal upholds the re-interpretation, in order to stave off the crisis.
Martin Green, chief executive of Care England, said: “The lack of clarity over sleep-ins is an enormous challenge facing providers across the country. The government’s recovery of sleep-ins must be suspended immediately, with a clear and definitive position on back payments put forward.”
However, Unison, which represents a number of care staff who work overnight shifts, has raised questions over the providers’ stance.
“It’s the government’s failure to fund social care properly that risks devastating the care sector, not the workers asking for a legal wage,” the union said.
“Charities and care companies have known for a long time they must pay sleep-in staff at least the minimum wage. But it’s only now HM Revenue & Customs is in pursuit that many are pleading poverty and asking for an exemption from the law.”
What does the government say?
A spokesperson for the government pointed to the 2015 guidelines issued by the department, noting that it is “an employer’s responsibility to know the law” and that the government had allocated an extra £2 billion of funding to the adult care sector at the last budget.
“We recognise the vital role social care providers play in supporting some of the most vulnerable people in our society and workers in that sector should be paid fairly for the important job they do,” the spokesperson said.
“The government is considering this issue extremely carefully and ministers continue to meet with care providers to ensure any action taken to protect workers is fair and proportionate.”
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