HM Revenue and Customs has told social care providers they can suspend self-assessments of a potential £400m back-pay liability following a landmark court case.
On 13 July, the Court of Appeal reversed an Employment Tribunal judgment against Mencap, which had ruled that sleep-in shift workers should be paid the full minimum wage instead of a flat-rate for each shift, which is common practice in the sector.
Before the appeal hearing, HMRC had demanded social care providers back-pay any sleep-in shift workers that had not been paid the full minimum wage for up to six years, which many providers warned could bankrupt them.
In November last year, HMRC launched a scheme whereby employers self-assess their back-pay liability over the following 12 months then pay all arears to workers within three months after that.
An estimated 1,000 social care organisations signed up to the government’s Social Care Compliance Scheme (SCCS), about 400 of which are charities.
But the Mencap ruling calls into question whether these organisations have any back-pay liability to assess and therefore could make the SCCS redundant.
Civil Society News understands HMRC has emailed employers signed up to the SCCS, advising them to take one of two actions:
1. Employers may suspend their self-review pending further advice from HMRC
2. Employers may continue their self-review taking account of the Court of Appeal Judgement and considering all other National Minimum Wage risks. HMRC are not able to provide any guidance on the judgement at this time.
In the email, HMRC adds that it will issue a further communication to employers in the next few weeks.
A HMRC spokesman refused to confirm the information in the email but said: “HMRC are presently considering the implications of the Mencap Court of Appeal judgement.
“Further information will be provided to Social Care employers who have entered SCCS in due course. Social care employers should continue their self-review until they hear further from HMRC.”
If a change to HMRC's scheme is not made before November this year, organisations that signed up to the programme immediately after its launch will in theory be required to repay any wage arrears to workers within three months.
The Court of Appeal ruling has led many organisations including Mencap to call for the government to change legislation to clarify National Minimum Wage rules in relation to sleep-in shifts.
Speaking in an NHS workforce debate in the House of Commons yesterday, Labour MP Barbara Keeley urged the health secretary, Matt Hancock, to change the regulations.
She said: “Will the secretary of state demonstrate the leadership that this government have lacked on this issue and ask the chancellor to change the regulations on the national minimum wage for sleep-in shifts, to show care staff that they matter?”
In response, Hancock said: “I saw the decision by the court and I have already had conversations with the Department for Business, Energy and Industrial Strategy, which leads on this regulation, to ensure that we can get the rules right for the future.”
Rhidian Hughes, chief executive of the Voluntary Organisations Disability Group, said: “We are calling on government to now make a decision and to be clear about what changes it is proposing ahead of wider consultation.
“Without this clarity then government needs to be aware that local commissioners and provider markets will react in an ad hoc and un-coordinated ways and this situation could lead to irretrievable developments by the time MPs return after recess.
“The Department of Health and Social Care needs also to urgently signal to commissioners that knee jerk reactions to pricing the provision of overnight support risks destabilising the market.”