For many years sleep-ins have been used as a way to ensure service user safety during the night, particularly in supported living. Historic practice was always to pay staff working a sleep-in a flat rate payment that would be less than the National Minimum Wage if every hour of the sleep-in was working time. This was because staff carrying out sleep-ins would typically sleep throughout most sleep-ins; rarely being disturbed to carry out duties.
Prior to the summer of 2016, HMRC appeared to take a consistent view that it was only the time that workers spent awake and working would be taken into account for NMW purposes.
Recently, however, HMRC has taken the view that every hour of sleep-ins counts where:
i) There is a requirement for the workers to be present during the night; and
ii) Those workers are not allowed to leave the service during the hours they are required to sleep-in.
As a result of HMRC’s change in approach, Anthony Collins Solicitors made various freedom of information requests asking questions to understand the reasons for the change. Matthew Wort, employment partner at Anthony Collins Solicitors, sets out their replies below.
In a statement made by HMRC following our first freedom of information request, HMRC stated that they:
“Enforce National Minimum Wage legislation in line with the policy set out by the Department for Business, Energy and Industrial Strategy… [HMRC officers] must require all employers to pay back any arrears that they find.”
Whilst HMRC are therefore taking action because they are seeking to enforce BEIS policy, until February 2015, BEIS’ own guidance stated that only hours spent awake and working counted in a typical sleep-in scenario.
We therefore believe it would be an unreasonable exercise of HMRC’s public duties to pursue enforcement action for a period prior to February 2015.
HMRC disclosed internal documents which revealed that, until February 2016, its inspectors were following internal, previously unpublished compliance guidance which stated that minimum wage was only payable “if the period when sleep is permitted is interrupted and the worker is awake for the purposes of working.” It provides that ‘time asleep usually is not working time’. It appears this guidance to compliance staff changed in August 2016. The change in approach was not published or subject to sector consultation.
HMRC enforcement powers are such that they can require repayment of arrears at current NMW rates going back for six years together with penalties of 200% of the amount of the underpayment. We are aware of a number of providers being served with notices of underpayment covering a six-year period.
We are battling HMRC for many of our care provider clients being investigated where HMRC are seeking to argue that all sleep-in hours count as working hours and that the providers should have been paying the full rate throughout the night for the last six years.
Whilst it is clear that the Government and HMRC are taking a steadfast approach to enforcement of NMW and sleep-ins, we believe, and advise our care provider clients, that there are grounds to persuade HMRC not to take enforcement action for the six year period. These arguments being based on BEIS’ own guidance until February 2015, and the HMRC internal guidance until February 2016, suggesting that only time spent awake and working counted as working time.
There are attempts across the sector to persuade the Government and HMRC to recognise the huge cost in the sector of a change in approach to payment for sleep-ins. In the meantime, providers will need to structure their arrangements in a way that will satisfy HMRC compliance and seek additional funding from local authority commissioners to meet any added costs.