HMRC National Minimum Wage enforcement action in connection with “sleep in payments” in the care sector

27 July 2017

Practice Area: Employment Law


The government today announced an immediate but temporary halt to HMRC National Minimum Wage enforcement action in connection with “sleep in payments” in the care sector.

Commenting on the changes Rachel Penny, a partner in Carson McDowell’s employment team, said:

“Historically, staff in, for instance, care homes who are required to perform a “sleep in shift” do not receive their normal hourly rate of pay for those “sleeping” hours. Instead they typically receive a flat rate of “sleeping” pay for that particular shift, usually around £25-£30 per shift.

“The reason they did not receive normal pay is because of the wording in the National Minimum Wage Act and regulations. Those rules provide that if the employee is given sleeping facilities at or near work, and is permitted to sleep, employers only have to count “waking” hours for the purposes of calculating minimum wage compliance.

“However, in what has been an increasingly grey area over recent years, we have observed a creeping change through case law in how that exemption has been interpreted. That culminated in April this year with a high profile decision of the Employment Appeals Tribunal in England, involving the charity Mencap. In that case, the court gave a clear steer that if the requirement to have staff present overnight - on hand to deal with emergencies but otherwise permitted to sleep - was a regulatory requirement, then the exemption was very unlikely to apply, although the court stressed that, as ever, each case depends specifically on its own facts.

“At the same time, HMRC has been taking a very pro-active approach to pursuing employers who might inadvertently have fallen foul of NMW for sleep in hours. Many organisations operating in the voluntary sector or reliant on public funding are suddenly facing the prospect of large sums of back pay and other penalties. There is anecdotal evidence that HMRC is requiring employers to look back up to six years.

“Today’s announcement effectively presses pause on the problem, while the government and the sector figures out what to do.

“This is not an easy problem to solve. It will require a tricky balance between paying employees what might be due to them, at the same time as making sure this does not push care providers to the brink of financial ruin. There has been lots of media speculation in recent weeks about the risk of bankruptcy, with consequent disruption to the care arrangements to scores of thousands across the UK.”

If you would like more information, please contact a member of the Employment team here.