The National Minimum Wage, Sleep-In Shifts and the Social Care Sector – Update on HMRC Enforcement



On 26 July 2017, HM Revenue and Customs (‘HMRC’) suspended enforcement action against employers in the social care sector in relation to the National Minimum Wage (‘NMW’)/National Living Wage (‘NLW’). This decision followed on from the decision in the Mencap case (Focus Care Agency Limited v Roberts, Frudd v The Partington Group Limited, and Royal Mencap Society v Tomlinson Blake, 2017).  The decision that a care worker could be “working” whilst asleep highlighted a significant liability in the care sector, where workers traditionally have been paid a fixed sleep-in allowance, and were often paid below the NMW/NLW.

The Social Care Compliance Scheme (‘SCCS’)

The Department for Business, Energy and Industrial Strategy and HMRC have announced the creation of a new Social Care Compliance Scheme (‘SCCS’) which is aimed at addressing back pay due. The ‘pause’ to HMRC enforcement of underpayments of NMW has now ended.

Employers in the social care sector will now be given the opportunity to sign up to the SCCS. This will still be subject to certain minimum criteria and to HMRC’s discretion.  An employer or someone who funds their own care (or receives money to fund their own care) is eligible to join.  If they have been previously prosecuted for an underpayment of the NMW, or declined an invitation from HMRC to join the SCCS, they will not be eligible.  HMRC will also have the discretion to remove someone from the scheme at any point in the future.

Those employers who are accepted on to the scheme will then be given 12 months to identify any arrears of pay, and then a further 3 months to pay. The scheme itself will come to an end by 31 March 2019.  During this period, HMRC will take no further enforcement action against any employer signed up to the scheme.  Members of the scheme will have access to HMRC technical support.

However, if an employer chooses not to sign up, then the normal enforcement regime will apply.  HMRC have made it clear that there will be no further concessions.  This leaves employers open to the possibility of prosecution, naming and shaming, and financial penalties of up to 200% of the amount owed (up to a maximum of £20,000 per worker).  There is one concession – the government will stand by its previous announcement that financial penalties will not apply to sleep-in arrears before 26 July 2017.

There are two significant omissions from this approach:

  • The announcement does not include any further financial support for the sector. The new scheme has been roundly criticised by prominent charities, including Mencap, and organisations representing care providers and workers. Employers have received no assurance of any potential financial support for their existing or potential liabilities for arrears of pay. Similarly, there is no indication as to whether or not any financial support might be affected by whether they have signed up to the scheme.
  • The scheme will have no impact on the ability of individual workers to take their own legal action (either in an Employment Tribunal or in a civil court claim) to recover arrears of pay.

The new scheme is unlikely to be the last word on this issue given the scope of the problem for the care sector. According to Mencap’s estimate, the sector faces a liability of up to £400 million as a result of the Mencap decision.  If the decision as to whether or not an employer should sign up to the scheme wasn’t difficult enough, Mencap’s appeal is also due to be heard in March 2018 and that has the potential to reverse the position.  Social care providers, commissioners, and local authorities face significant financial constraints, and unless a solution can be found to the historic liabilities for arrears of pay, and without any reassessment of the funding for current care arrangements, then it is almost certain that the government and HMRC will have to revisit this issue.

It is possible there will be assistance for the sector in the future but that is uncertain, and certainly unquantifiable. So for those looking at this, should they join the scheme?  The answer will differ for each provider/employer.  If there is not already an invitation to join by HMRC, the provider may be better waiting.  If a provider is invited to join the SCCS, then this at least gives the provider some time to consider the implications.

For advice and assistance, please contact:

Martin Cheyne – Tel.01423 724 121

Julia Gray – Tel.01423 724 106

James English – Tel.0191 230 6054

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