19.07.17 Changes to the NMW guidance could see charities become insolvent

Charities that care for disabled and vulnerable people may face a funding crisis if a ruling to pay overnight workers the National Minimum Wage (‘NMW’) is upheld.

Government guidance on the minimum wage issued in 1999 governed that carers received a single flat-rate payment of £25 or £35 for an overnight shift. Following two tribunal cases, the guidance on the NMW has been updated to state that the organisations must pay the appropriate hourly NMW rate for the entire shift worked, with potentially up to 6 years back pay.

See the Department for Business, Energy and Industrial Strategy’s guidance on calculating the minimum wage here, including a section on “sleeping between duties” which states;

“A worker, who is going to be working, even though they are asleep, is entitled to the minimum wage for the entire time they are at work”.

It goes on to say a worker is found to be ‘working; if there is a statutory requirement for them to be present or they would face disciplinary action if they left the workplace.

Reportedly, HMRC began investigating and issuing care organisations with enforcement notices, demanding that they repay millions of pounds in back pay to workers by September. There are estimated to be around 200 organisations that will be affected by the ruling, with an estimated £400m in back payments.

Affected charities have suggested that councils need to pay more for future contracts to cover the additional costs and requested that the enforcement notices are suspended until the appeal court hearing in March 2018.

Read our recent news on NMW and “sleeping on the job”, here.

Aspire Comment

The NMW guidance brings many care charities under potential threat as they may not be able to afford the additional costs that it brings. Councils are refusing to accept the reality that they need to pay the charities more due to the higher wage bills and so, are being forced to cancel contracts.

The risk of failing to pay the appropriate NMW/NLW to a worker when they are entitled to it can be very costly and damaging to your reputation with large fines as well as ‘naming and shaming’. If you’re concerned about whether you have been correctly paying the NMW/NLW to your workforce then please get in touch with Aspire to discuss how we can help.