MHA considered ‘a legal challenge’ after HMRC said it underpaid six staff

09 Aug 2021 News

Methodist Homes (MHA) has said it “robustly challenged” HMRC’s approach to calculating the national minimum wage, after rent rules meant MHA breached legislation.

Last week the government named several charities, including MHA, for not paying the national minimum wage to some of their staff.

In a statement MHA said the issue came to light after HMRC carried out a routine review of MHA’s payroll and identified that it had a small number of employees who rent accommodation from the charity.

This affected six workers, and the charity says it has sorted out the situation, but that it disagrees with HMRC's approach for charities that rent accommodation to employees.  

Rent rules meant MHA breached the legislation

When employers rent accommodation to staff the cost needs to be taken into account when checking people receive the correct minimum wage. 

The number of hours an individual has worked are multiplied by their hourly rate. Then the cost of rent is deducted from that amount, except for a small accommodation allowance. The amount that is left is then divided by the number of hours they worked in that month to see what the true hourly rate is. If that amount falls below the minimum wage, then there is a breach.

MHA said this means that organisations must subsidise accommodation or prevent employees from having access to rented properties. 

In a statement MHA said: “On six occasions, this did not happen, which means we have technically breached the legislation. As is our duty, we have made good the situation and have systems in place to make sure it does not happen again.” 

'We robustly challenged their approach'

In its statement MHA said it is “proud to be one of the few in the care sector to pay our staff at least the Real Living Wage”.

Furthermore MHA “fundamentally disagrees” with HMRC’s approach to accommodation within the legislation. 

“We fundamentally disagree with HMRC’s approach to accommodation within the legislation and believe that it was not the intention to penalise charities that pay their people well and choose to rent properties,” the charity said.

MHA said: “We robustly challenged their approach and considered it a legal challenge. However, we could not be certain or limit the costs of a legal challenge or that we could guarantee the outcome. We are conscious that as a charity, we need to direct our work for the benefit of the older people we care for and support.”

MHA said it accepts that “clearly technical breaches such as this need to be addressed”. But the government should “come forward with its long-promised reforms for the care sector, including recognising and remunerating the skills of care workers and proposing a much-needed workforce strategy”. 

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