National Minimum Wage implications of sleep-in shifts

This update from Deloitte explains changes that could affect housing associations that make payments to workers undertaking sleep-in shifts.

7 December 2017

Following recent tax tribunals relating to the tax treatment of payments made to workers undertaking sleep-in shifts, HMRC has confirmed its view and launched a disclosure scheme. 

The tribunal rules that workers undertaking sleep-in shifts should be paid National Minimum Wage or Living Wage, rather than a flat rate per night. Deloitte is advising a number of clients following HMRC contact about this issue. 

Impact of the ruling

Initially, in July 2017, the Government announced it would temporarily suspend enforcement activity in the social care sector to address underpayments for workers on sleep-in shifts. It has now launched a new compliance scheme relating to these payments. 

Social care providers presenting risks of National Minimum Wage/Living Wage underpayment for sleep-in shifts will be given the opportunity to opt into the Social Care Compliance Scheme, subject to meeting minimum criteria and at HMRC's discretion. 

The Social Care Compliance Scheme will require providers to undertake a self-review to identify and repay any National Minimum Wage/Living Wage arrears to workers. The provider will be given up to 12 months to undertake the review, with a deadline of 31 December 2018, which is the cut-off date to join the scheme. 

Participants in the scheme will also get up to three months to pay all arrears in relation to sleep-ins following the completion of the review, with a deadline of 31 March 2019. 

Implications of failing to pay National Minimum Wage/Living Wage

Failing to pay the National Minimum Wage/Living Wage can result in significant financial costs, with penalties of up to 200% of the amount underpaid being levied on top of the requirement to pay the underpaid salary. In addition, the organisation will be named and shamed on a Government list, which could have a considerable impact on the reputation of the housing association. 

Impact on the housing sector

The main focus of the tribunal and HMRC's subsequent disclosure scheme is the social care sector. However, we are aware that a number of housing associations also make payments to workers undertaking sleep-in shifts. The tax treatment determined by the tribunals and HMRC will apply to the housing sector, where similar payments are made. 

It is not yet clear whether the Social Care Compliance Scheme will be open to organisations outside the social care sector. Therefore it is essential that housing associations establish whether they make these types of payments, and if they do, they should consider whether they wish to, and are eligible to, join the Social Care Compliance Scheme. 

If your organisation has made these payments or you think it may be liable, please contact John Butler, Finance Policy Leader at the Federation, or by phone on 0207 067 1177.