Mencap is delaying investment in its fledgling retail operation due to uncertainty around a potential £20m back-pay liability, according to recently filed documents.
The charity’s accounts running to March 2017 say that it plans to reduce its £21.5m free reserves to its target of £13.1m and say that opening a chain of retail stores is the main way it will do this.
Mencap opened its first 10 shops in 2016/17, a mix of donation stations, standard stores and discount stores. It has an overall plan to open more than 100 in the next five years.
However, Mencap said its trustees “are delaying commitment to utilise the remaining free reserves” until potential liabilities regarding back-pay for overnight sleep-in shift workers historically paid less than the minimum wage are clarified.
Mencap said the government “has been clear that it believes that people should be paid a top-up to apply average national minimum wage to historic sleep-in shifts”.
The charity estimates its own liability to be £20m, involving 3,500 members of staff over a six-year period.
But Mencap is calling for the government to foot some or all of the bill itself, as the charity argues that the liability is “a result of government guidance and consequent historical under-funding, making it a government responsibility”.
Regarding the charity’s reserves strategy, the report says: “The charity plans to reduce its free reserves in a managed fashion through a combination of investment in strategic and progressing with the plans to open a chain of retail stores, which require investment in the initial years.
“In addition to investing in the future, the charity is awaiting legal clarification of the ongoing issue around applying national minimum wage regulations to historic sleep-in payments.
“As a result, the trustees are delaying commitment to utilise the remaining free reserves until any potential liabilities are clarified.”
Mencap is awaiting a Court of Appeal hearing for its case, Royal Mencap Society v Mrs C Tomlinson-Blake, regarding a former sleep-in shift employee.
In April 2017, an employment appeal tribunal upheld an employment tribunal ruling from August 2016 that the employee should have been entitled to the minimum wage throughout her shifts worked for the charity.
However, Mencap’s accounts say “the current legal advice is that there is a realistic probability that the appeal will be successful”.
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Mencap spent £670,000 on redundancies in 2016/17, down from just over £1m the previous year as its overall estimated headcount fell from 8,260 to 8,181.
The charity’s income rose by £600,000 to £191.9m while its expenditure grew by £4.5m to £188.5m, due to an increase in spending on charitable activities.
Therefore, Mencap’s surplus was lower than in the previous year, dropping from £7m to £4.2m.