HMRC publishes revised NMW enforcement guidance

NMW image
Photo of Justine Ricccomini By Justine Riccomini, Head of Taxation (Scottish Taxes, Employment and ICAS Tax Community)

3 August 2017

Revised National Minimum Wage (NMW) enforcement guidance has been published by HMRC at the same time as waiving enforcement arrears of penalties resulting from sleep-in shifts that took place in the social care sector before 26 July 2017 due to ‘misleading’ guidance.

The National Living Wage and Minimum Wage hit the headlines again at the end of July as HMRC published its revised guidance on NMW policy, as set by BEIS, which describes its approach to employers who are found to be not paying the minimum wage.

HMRC has back-tracked on its approach to the treatment of retrospective NMW shift pay to social care workers in receipt of a flat rate allowance for so-called ‘sleep over’ shifts arising before 26 July 2017. In such scenarios, the worker might spend part of the time asleep but was on hand to attend to the needs of the client during the night.

Back tracking...

BEIS (BIS as was) had originally confirmed the position to be that residential care home workers and home care workers did not need to be paid NMW for such a shift and could receive a flat rate allowance instead. 

However, following two important employment tribunal decisions (Focus Care Agency Limited v Roberts [2017] UKEAT/0143/16/DM and Whittlestone v BJP Home Support Limited [2013] UKEAT/0128/13/BA) which hinged on the definition of ‘work’ for NMW purposes, BEIS changed its stance and said that NMW should be paid for all shifts, including sleep overs. 

This would be retrospective, meaning care organisations would become liable for up to six years of back pay – and penalties – pushing many of them into potential insolvency positions.

The penalties are tough – sitting at 200% of the amount deemed to be underpaid, capped at £20,000 per worker.

It doesn’t end there. 

HMRC has announced a hiatus in its enforcement activity in line with BEIS policy, suspending it between 26 July and 2 October 2017 whilst a social care employer NMW stakeholder consultation takes place. 

However, HMRC has made clear its aim to continue to pursue underpayments in the care sector from 2 October 2017. Any care organisations found to be paying less than NMW post 26 July 2017 will be subject to strict enforcement action and the ever unpopular ‘naming and shaming’ treatment.

The following table sets out the timeline:

Period Pre-26 July 2017

Period Post-26 July 2017

Period 26 July 2017 –  2 October 2017

Period Post - 2 Oct 2017

HMRC will not be enforcing penalties on underpayments of NMW in the care sector relating to sleepover payments before this date as the guidance was “misleading” and could have been misinterpreted

HMRC is expecting employers in the care sector to pay NMW for sleepover payments from this date onwards

HMRC is consulting care sector employers between these dates and has announced a temporary hiatus in ongoing enforcement activity of these employers during this period

HMRC will resume its enforcement activity on 2 October 2017 and will be looking back to periods from 26 July. Any employers found to be contravening NMW legislation and guidance on sleepovers in the care sector will be subject to enforcement penalties and naming and shaming backdated to 26 July 2017

As well as having a huge financial impact on the pay bills of care organisations going forward (hence the consultation), arrears of pay will still be due unless the employer can show that they do not have the means to pay them (e.g. they are insolvent) which means that although the employees have a legal claim, they may never actually get the money. 

This in itself could have knock-on financial impacts for them and their families.

View the full revised NWM enforcement guidance.

Topics

  • Tax

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