The government has said will waive financial penalties which have been levied on disability charities by HMRC for underpaying overnight shift workers and suspend enforcement action for two months while it works with the sector to "minimise" the impact of an estimated £400m back-pay bill.
Last week Mencap warned that the disability care sector is “on the brink of collapse” with multiple charities facing insolvency, after HM Revenue & Customs sent out demands for six years’ worth of back-pay for carers on "sleep-in" shifts - estimated to cost the sector up to £400m.
Today the Department for Business, Energy & Industrial Strategy (BEIS) has responded to the sector’s concerns by agreeing to waive historic financial penalties owed by employers who have been ruled to underpay their workers for overnight sleep-in shifts before 26 July.
Waiving the penalties levied by HMRC does not affect the estimated £400m in back-pay that employees are owed. The government also emphasised the importance of paying the natioanl minimum wage and sid any arrears in pay after today will also be subject to the usual 200 per cent penalty.
It has also temporarily suspended HMRC enforcement activity concerning payment of sleep-in shifts by social care providers until 2 October.
In a statement today, BEIS said that the government "recognises that written guidance published before February 2015 was potentially misleading" and that it will "continue to work with representatives of the social care sector to see how it might be possible to minimise any impact on provision of social care as a result of this situation".
Guidance published by BEIS last October, which says minimum wage must be paid to workers even if they are asleep and uses a care home as an example, has caused controversy in the sector as it contradicts many providers’ previous practice of paying these workers a flat-rate of between £35 and £45.
'Critical issue unaddressed'
Today's announcement follows lobbying by disability charities including Mencap, whose chairman Derek Lewis welcomed today's announcement but warned the changes do not address the “critical issue” of demands for £400m in back-pay.
He said: “The announcement of a brief two-month stay in enforcement action is welcome, as is the assurance that penalties will not be levied on top of the back pay liability but neither addresses the catastrophic impact of the £400m back pay bill across the sector on providers, people with learning disabilities and care workers in one of the most vulnerable sectors of society.”
“Employers are keen to fulfil their responsibilities to employees. But if the government changes the rules on how sleep-in payments should be paid it must expect to have to pay for the changes.
“We reiterate our call to government to accept its responsibility and make an urgent commitment to fund the back pay bill, for the sake of those vulnerable people who depend on this care and for the dedicated people who provide that care. Time is running out.”
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Dr Rhidian Hughes, chief executive of umbrella body VODG, said the announcement was a “significant step forward” but similarly warned further action was needed.
“We need to agree a solution that works for the sector and avoids significant litigation. This includes removing the risk of back pay claims against employers.
“Through the forthcoming negotiations VODG is committed to ensuring that the future arrangements work for all parts of the sector, and that includes individual employers, such as those who use personal budgets, so that they are not disadvantaged in any way."