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Sleep-in Shifts and the Social Care Compliance Scheme

Sleep-in Shifts and the Social Care Compliance Scheme

1. Background to the Scheme

On 1 November 2017, the Government launched the Social Care Compliance Scheme (the “Scheme”) for social care providers that may have incorrectly paid workers below the National Minimum Wage hourly rates for sleep-in shifts. Social care employers may opt into the Scheme, giving them up to a year to identify what they owe to workers, supported by advice from HMRC. Employers who identify arrears at the end of the self-review period will then have up to three months to pay workers.

HMRC has been writing to social care employers who currently have a complaint against them for allegedly underpaying minimum wage rates for sleep-in shifts to encourage them to sign up to the scheme. Employers that choose not to opt into the scheme will be subject to HMRC’s standard enforcement procedure.

Earlier this year the Government waived further penalties for sleep-in shifts underpayment arising before 26 July 2017. This was in response to concerns over the combined impact which financial penalties and arrears of wages could have on the stability and long-term viability of social care providers. Enforcement action for sleep-in shifts in the social care sector was temporarily suspended between 26 July and 1 November 2017.

2. Membership

Membership of the scheme is voluntary; HMRC cannot compel anyone to join. The pertinent question then is whether an employer would benefit from joining. Employers with the greatest incentive to join are those with reason to believe an investigation by HMRC will result in a penalty against them. As for employers who have been compliant since 26 July 2017 there is much less incentive to join.

Although penalties may only be levied for underpayment of minimum wage rates which occurred after 26 July 2017, the window of investigation for potential underpayments goes back six years. It should also be noted that if you receive an invitation from HMRC to join and you refuse, you may not join at a later date as it is a one-time only offer.

3. Advantages of Membership

Clearly the main advantage of membership is avoiding the onerous penalties which HMRC is empowered to levy against employers who are found to have underpaid from 26 July 2017. These penalties can be up to 200% of the amount owed, up to a maximum of £20,000 per worker. If you know for certain that you have not underpaid since 26 July 2017 then this will not be much of an incentive to join, as the Government waived further penalties for underpayments prior to this date.

The policy paper National Minimum Wage Law: Enforcement was updated by the Department for Business, Energy and Industrial Strategy on 1 November 2017 (the same day as the launch of the scheme). The paper states at paragraph 3.7.6 that the Secretary of State has issued a direction that a Notice of Underpayment is not to impose a financial penalty where:

  • part of the underpayment is attributable to the treatment of, or arrangements concerning, time when the worker was working and was, by arrangement, permitted to sleep; and
  • that part of the underpayment occurred in a pay reference period that ended before 26 July 2017.

The other main advantage of the scheme is that if you are found by HMRC to have underpaid your workers, you will not be publicly named for underpayment of National Minimum Wage. The weight ascribed to the advantage will be personal to each employer, however, it is important to note that public naming is not limited to underpayments made from 26 July 2017. If an employer is found to have made underpayments at any time in the last six years, although you will not incur penalties prior to 26 July 2017, HMRC will still put your name forward for public naming in accordance with the standard enforcement procedure.

4. Conclusion

If a care provider is certain that they have not underpaid since 26 July 2017, there is little benefit to joining the scheme. HMRC cannot levy penalties for underpayments prior to this date, however, HMRC will still publicly name them if they are found to have done so.

By Ronnie Brown
Partner

Burness admin