Social care sector and HMRC enforcement for underpayment of National Minimum Wage

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The Government has announced plans aimed at easing the financial burden on social care employers in respect of wage underpayments for ‘sleep-in’ shifts.

Recent court decisions that the national minimum wage (NMW) is often payable for ‘sleep-in’ shifts has led to huge potential financial liabilities in the already beleaguered social care sector. In consequence, HMRC has been investigating social care employers for NMW underpayments which, in addition to liability for the underpayments themselves, gives rise to additional liability for HMRC penalties of 200% of the arrears owed subject to a maximum penalty of £20,000 per worker.

Earlier this year, in recognition of the difficulties faced by the sector, the Government temporarily suspended HMRC enforcement activity and agreed to waive financial penalties in respect of underpayments applying to sleep-in shifts worked prior to 26 July 2017. This meant that social care employers would still face liability for the underpayments but without the added burden of financial penalties.

The Government has since announced the new Social Care Compliance Scheme (SCCS) which will enable healthcare providers to identify what they owe to workers and will give them three months to pay back pay if it is owed. As the compliance scheme is voluntary, employers who choose to opt-out will be subject to HMRC’s normal enforcement regime (although HMRC has strongly urged providers to make use of the scheme, especially those that have already been identified as failing to pay the minimum wage to sleep-in staff).

The fact that the Government has introduced this scheme alongside its normal enforcement activity underlines how seriously it treats NMW non-compliance generally. In addition to the Government’s ‘naming  and shaming’ scheme, HMRC are actively investigating employers who underpay workers and it therefore remains as important as ever to ensure that there are no errors when calculating pay.

If you would like any advice on this topic please contact David Smedley or Andrew Rayment.