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New Social Care Compliance Scheme launched – but independent advice essential
On 1 November 2017, HMRC introduced the Social Care Compliance Scheme, aimed at employers in the social care sector (including individual employers who have taken on their own carers or personal assistants) who may have inadvertently underpaid their workers for ‘sleep-in’ shifts.
Under National Minimum Wage (NMW) regulations, sleep-in shifts can count as work for which NMW is payable. After many years of confusion in this area, case law has now confirmed that care workers can be entitled to the NMW for hours spent on sleep-in shifts. Whilst the latest position now provides a greater degree of certainty for workers who undertake these shifts, it means that many employers have paid below the NMW for such shifts and may now be liable to pay substantial NMW arrears.
Concerns over the impact of historical liabilities associated with sleep-in shifts on social care employers and the fact that Government guidance had not always kept up with developing case law on the issue, led to two announcements earlier this year by the Government, aimed at giving employers a bit of a break and which you can read more about on the Disability Tax Guide website.
The Government’s latest publication on this issue, announcing the introduction of the Social Care Compliance Scheme (SCCS) can be found on GOV.UK.
Through the SCCS, the Government is providing a voluntary opportunity for employers to identify what they owe to workers, supported by technical advice from HMRC.
Employers who identify arrears at the end of the self-review period will then have up to three months to pay workers and will not:
- Run the risk of incurring financial penalties of up to 200% of the amount owed to their workers, up to a maximum of £20,000 per worker
- Be publicly named for underpayment of the NMW
You can find more information about the SCCS in HMRC’s guidance.
On the face of it, this scheme may seem an attractive proposition for employers who may have a problem, however there is a lack of detail in the guidance – for example it is not clear how far back this scheme may extend. Further, while the HMRC guidance reiterates its position on when sleep-in shifts are considered as work, in our view, this has been somewhat oversimplified. This is a complex area of law and a recent key judgment set out that a multi-factorial approach should be adopted for assessing each sleeping time case. You can find out more about the factors to be considered from the Disability Tax Guide website.
Accordingly, if you are a social care employer, we recommend that you consider obtaining independent and professional advice to determine whether you have failed to comply with the NMW rules before taking any action around the SCCS. It may be the case that your situation can be distinguished from this case or that the work your employee does is ‘unmeasured work’ which may not be subject to the same NMW rules.
You have until 31 December 2018 to enter the scheme if you need to (the final deadline for paying arrears will be 31 March 2019), leaving you with plenty of time to establish whether you are actually at risk of having underpaid the NMW. If you are an individual employer, and have received money from your local authority, the Department of Work and Pensions or the NHS to help you pay for a carer or personal assistant, you should contact them to discuss who may cover any additional costs of seeking such advice and any potential additional payments that may need to be made as a result.
A number of other issues remain unresolved. It is not yet clear whether and how the Government may be able to offer support to employers to help them pay for the underpayments. It is not clear how ‘sleep-ins’ interact with the accommodation offset which is the amount that can be counted towards the minimum wage when living accommodation is provided. Nor how the arrears payments should be dealt with through the payroll, and the potential impact on the worker’s tax, National Insurance, pension or benefits position on receipt of the arrears payments.
Hopefully, further information and details about the SCCS scheme, as well as confirmation on whether the Government can help employers fund any arrears, will also be issued shortly. (It should be noted that the Government has opened discussions with the European Commission to determine whether any support to employers to help them fund the underpayments, if deemed necessary, would be subject to EU state aid rules.)
In the meantime, employers who decide not to opt-into the scheme (where it would otherwise be appropriate) will not be offered any further concessions. They will be subject to the full HMRC investigative process – including financial penalties (except for sleeping time arrears accrued before 26th July 2017), public naming and possible prosecution where appropriate. You can read the Government’s updated guidance on its approach to enforcement of the National Minimum Wage in sleep-in shift cases on GOV.UK.