Over 800 employers with ‘significant’ sleep-in underpayments identified by HMRC

But this month’s Court of Appeal ruling casts doubt on whether these need to be paid

Over 800 employers with ‘significant’ sleep-in underpayments identified by HMRC

At least 800 employers signed up to HM Revenue & Customs’ (HMRC) sleep-in wages disclosure scheme before the Court of Appeal ruled such shifts did not need to be paid at national minimum wage (NMW).

HMRC data obtained by People Management under a Freedom of Information request revealed 835 employers entered the Social Care Compliance Scheme (SCCS) between 1 November 2017 and 30 April 2018.

The SCCS was launched on 1 November 2017 to allow social care providers that may have paid staff below the legal minimum for sleep-in shifts – essentially, where care workers are required to stay on work premises overnight –  to tell the taxman about it. By making such a disclosure, businesses could avoid being fined – currently 200 per cent of the amount owed, capped at £20,000 per worker – or added to the periodically published name-and-shame list of employers who have failed to pay staff at least NMW. 

In its first six months, the SCCS also identified a total £735,494 of arrears owed to 479 workers, although the scheme required employers to disclose all potential NMW breaches, not just sleep-in shift underpayments. 

As underpayments identified under the scheme are required to be paid within three months, Charlie Barnes, associate director and employment lawyer within RSM Legal, noted it would be reasonable to assume “the majority of that would have already been paid back [or be being paid back] as we speak”.

“For some of these care homes, that is a significant sum to be paid,” he added. 

Meanwhile, James Sage, partner in the employment team at Royds Withy King, told People Management HR may now face the undesirable task of telling staff they might not be getting back payments after all. 

“Many of those employers may well have been in communications with staff, saying, ‘Well, we’ve joined the scheme, we’re going to work out what the calculations are and then go back and repay you’ … so managing that and backpedalling on what some of the employers might have said they are going to do is potentially one of the other issues arising,” he said.

In a case brought by care support worker Claire Tomlinson-Blake against Royal Mencap Society, an employment tribunal ruled in August 2016 that sleep-in shifts must be paid at NMW. The Employment Appeal Tribunal (EAT) agreed in an appeal judgment in April 2017.

However, earlier this month, the Court of Appeal overturned these previous rulings, deciding that sleep-in shifts did not attract NMW. In his judgment, with which the other two judges unanimously agreed, Lord Justice Underhill explained this was because sleep-in workers were “available for work” but not “actually working”. 

The Court of Appeal judgment was welcomed by many employers in the social care sector, which had faced a reported £400m pay bill between them if the original tribunal finding was upheld. However, trade union Unison announced it was considering an appeal to the Supreme Court shortly after the Court of Appeal’s judgment was handed down. 

Describing it as a “very sensitive” issue, Barnes remarked: “Quite rightly, those who work in this field should be paid appropriately for the work that they do...but then you also have to balance that against the financial liability of these care homes, who really rely on government funding to pay those wages.”

And Derek Lewis, chair of Royal Mencap Society, said shortly after the Court of Appeal judgment: “We did not want to bring this case. We had to do so because of the mayhem throughout the sector that would have been caused by previous court decisions and government enforcement action, including serious damage to Mencap’s work in supporting people with learning disabilities.”

When asked about the future of SCCS, a government spokesperson said: “We are considering the [Court of Appeal] judgment and will comment shortly on its implications.”