Payments to workers undertaking sleep-in shifts – major change to position

The Court of Appeal has ruled that time spent sleeping will not be taken into account in calculating the National Minimum Wage (NMW). This will avert major costs in back payments that some supported housing providers were facing.

9 August 2018

The Employment Appeal Tribunal (EAT) ruled in April 2017 that care sector employees on sleep-in shifts were entitled to be paid at least the NMW for each hour they were onsite with a client, even while sleeping.

On 13 July 2018, the Court of Appeal overturned this decision, largely down to the interpretation of the NMW legislation’s distinction between ‘time work’ and time during which the worker is ‘available for work. 

As the NMW legislation states that it is only time when the worker is required to be awake for the purposes of working which can count for NMW, the Court of Appeal ruled that time spent sleeping should not be taken into account in calculating NMW.

How does this impact housing associations?

This is a very significant and welcome decision for those supported housing providers that were facing significant costs due to back payments.

Many care and housing sector employers have already been required by HMRC to settle back pay claims and penalties, following the EAT decision in 2017, and have also suffered reputational damage by being named and shamed for not paying NMW.

Other employers have also signed up to HMRC’s social care compliance scheme (SCCS) to avoid the penalties which would otherwise have been imposed had HMRC undertaken compliance action.

Therefore this Court of Appeal decision will leave these employers with a lot of questions for HMRC on how it impacts these recent payments and penalties

Further information to come

HMRC haven’t yet commented on the Court of Appeal decision, though it seems unavoidable that HMRC will need to change its approach to NMW compliance in the care and housing sector, and operation of the SCCS will presumably be put on hold.

It is also currently unknown whether there will be any recognition of, and mitigation offered for, the back pay claims and penalties already settled by affected employers.

Going forward, the longstanding practice of making flat rate payments for sleep-ins is likely to mean that employers in the sector are now meeting their NMW obligations. Across the care and housing sector this averts an estimated £400m back pay crisis.

However, it should be noted that the case could be appealed to the Supreme Court and so employers should mark the risk of the position changing again.

For more detail you can contact Deloitte: Tim Waterhouse (twaterhouse@deloitte.co.uk, 01727 88 5133) and Tom Smith (tomjsmith@deloitte.co.uk, 0117 984 3742).