The loudest criticisms of the Autumn Budget from the sector came from learning disability charities angered by the government’s failure to address the “sleep-in crisis” facing the adult social care sector.
Tim Cooper, chief executive of charity provider United Response, called the situation “an existential threat to some social care providers, not to mention their staff and the vulnerable people we care for.”
So what is the sleep-in crisis? And why have charities including Mencap and HFT been calling for the government to intervene for months?
The first issue is that charities have traditionally paid a flat flee to overnight workers who were asleep, and have now been told they must pay these workers minimum wage instead. This will leave the sector with a larger wage bill going forward.
The second is that workers who have received the flat fee could be in line to receive six years’ back pay. In addition, charities could in theory be hit with fines for underpayments. This would bankrupt many charities.
Charities feel that central government has moved the goalposts, so it should fund the increased costs. So far government’s solutions have proved unsatisfactory.
Letters obtained by Civil Society News under the Freedom of Information Act show that for 18 months, and possibly much longer, charities have been warning the government of their concerns that a requirement to pay all overnight workers the National Minimum Wage could bankrupt them, without additional funding from either central or local government.
How did it come about?
Most social care providers that use overnight workers - about 40 per cent of which are learning disability charities - now publicly accept that they must pay the minimum wage for time spent at work while asleep.
But until recently they had not paid this to staff working sleep-in shifts - when a worker is on-call to provide social care assistance, but is allowed to sleep on-site when their services are not required.
Previously, social care providers had only paid the minimum wage rate to workers for the hours they were awake, on top of a flat rate of £25 to £45 for the entire shift.
Providers have referenced National Minimum Wage regulations as the reasons why workers were not paid the base rate for the hours they were asleep as well. The regulations seem to support the providers, as did HMRC guidance. The full guidance is available below.
But in the past few years, flat rates have been challenged in court by some overnight workers.
This April, in the case Royal Mencap Society v Mrs C Tomlinson-Blake, an employment appeal tribunal upheld an employment tribunal ruling from August 2016 that Mencap’s sleep-in shift employee should have been entitled to the minimum wage throughout her shifts worked for the charity.
“The claimant was required to be present and would have been disciplined if she left the house, putting Mencap in breach of its legal obligations,” the ruling says.
At the same hearing, a similar appeal case Focus Care Agency Ltd v Brian Roberts was also dismissed by the EAT. The agency argued that the private firm’s employee raised no complaints about their flat-rate £25 pay per shift and that there was another member of staff, a “waking night shift worker”, who held the primary responsibility to the service user. The first point was dismissed, as a flat rate was not mentioned in the worker’s contract so Focus’ appeal was unsuccessful.
However, the issue around the presence of a second worker does not appear to have been clarified. The judge said “I would not have felt able to uphold the employment judge’s decision” on the matter.
Mencap’s case has since been referred to a court of appeal, due to be heard in March 2018, so the dispute remains unresolved.
The workers have been backed by unions including Unison, who say that charities and the government should have known years ago that paying a flat rate was wrong.
Government guidance
These decisions have sent shockwaves through the social care sector, with many expressing concerns to government over fears they could face similar action.
To address this uncertainty, the government produced guidance in October 2016 on how to apply the minimum wage, using a care home as an example to clarify that sleep-in shift workers must be paid the full rate for their entire shift.
“A person works in a care home and is required to work overnight shifts where they sleep on the premises. The person’s employer is required by statute to have someone on premises for health and safety purposes. The person would be disciplined if they left the premises at any stage during the night.
“It is likely that the person would be considered to be ‘working’ for the whole of the overnight shift even when they are sleeping.”
How much will back pay cost?
Following the updated guidance's publication, HM Revenue and Customs sent letters to providers, demanding they offer back pay to sleep-in shift staff, covering the full minimum wage for up to six years.
Learning disability charities warned that such a demand could cause many providers to go bankrupt instantly. A new organisation, Learning Disability Voices, was formed to campaign specifically on the issue.
VODG commissioned consultancy Cordis Bright to privately estimate how much the sector could have to pay. After that work, VODG estimated the sector could collectively be forced to make a one-off payment of up to £400m, if HMRC’s demands for six years’ back pay were be successful.
This figure contains many assumptions about the number of bodies affected, the number of shifts worked, and the amount paid. If charities paid an average of £4 per hour rather than £5, for example, and the average worker did two shifts, rather than 1.6, the cost could easily be £600m.
How much will it cost going forward?
Cordis Bright also estimated that the additional annual cost to the learning disability sector could be £200m a year.
Learning disability charities have broadly resigned themselves to paying up, going forward, with Mencap announcing in June that it had started paying the minimum wage to all sleep-in shift workers. However, providers have warned that this increased wage bill is unsustainable without extra government funding.
Some charities have told Civil Society News that the rise in their wage-bill will cause them to reduce some of the services they provide. So it will be their beneficiaries that ultimately lose out from a lack of government funding. The increased rate for overnight workers also puts pressure on charities' fees for day-time workers, who will want to be paid more than a sleep-in shift rate.
These charities have been campaigning heavily this summer for the government to provide funding for the back-pay and for central or local government to increase future funding.
For its part, the Local Government Association said in a briefing published in August that it was discussing with the government “the implication for councils as the allocators of personal budgets and direct payments, as well as the personal, financial and wellbeing impact on people in need of care and unpaid carers”.
But councils are unlikely to provide more money themselves without greater funding from central government.
What is the proposed resolution?
In July this year, after increasing coverage of the sleep-in crisis by mainstream media, the government announced it would pause HMRC’s enforcement of demands for back-pay for three months while ministers held talks with the sector. The aim of the talks was to achieve a resolution that satisfied both parties, as well as unions and local authorities.
The government also announced it would be commissioning Deloitte to undertake its own estimate of the sector’s back-pay liability, but this has not been published and Civil Society News understands it may have been scrapped.
Mencap quickly made clear what it hoped to achieve from the talks by launching its #StopSleepInCrisis campaign, calling on the government to fund, or contribute to, the sector’s potential back-pay bill.
Its online petition page, still open, reads: “We are asking the government to commit urgently to paying this bill as the sector cannot afford it. Government caused this problem. Only they can fix it.”
Celebrities including Kit Harrington, Jodie Foster and Joanna Lumley backed the campaign and so far more than 17,000 members of the public have signed it, although this is a few thousand below the charity’s target.
Temporary solution
After initially extending the pause in HMRC’s enforcement for a month to buy itself a bit more time, at the start of October, the government announced its temporary solution.
Its voluntary Social Care Compliance Scheme (SCCS) requires organisations to assess their own back-pay liability and repay any wage arrears to workers.
Providers who sign up will normally be given twelve months in which to conduct the self-review with access to HMRC technical support, and then up to three months to pay all arrears. But the deadline for repaying arrears to workers will not be later than 31 March 2019.
Organisations that join the voluntary scheme will remain anonymous and not be required to pay an additional financial penalty for underpayment. Suppliers who do not join the scheme will be subject to a full HMRC investigation, public naming and shaming, and additional financial penalties.
These additional penalties could be significant as they are worth double whatever an organisation is found to owe its staff, capped at up to £20,000 per worker.
No new funding was announced. The government said it was “exploring options to minimise any impact on the sector” and that it was discussing with the European Commission “whether any support, if deemed necessary, would be subject to EU state aid rules”.
Widespread criticism
The SCCS was heavily criticised by charities and unions alike.
Christina McAnea assistant general secretary of Unison condemned the government’s announcement for failing to include any new funding and said the scheme “helps no-one”.
She said: “Ministers knew for years that sleep-in workers were not being paid properly. If they'd stepped in sooner, this mess could have been avoided. Unfortunately the voluntary nature of this scheme means unscrupulous employers will now be able to slip through the net and their staff won't get a penny back.”
Tim Cooper of United Response called the proposals “a fudge with potentially disastrous consequences for some of the most vulnerable people in our society” while Derek Lewis, chair of Mencap, also criticised the scheme and said smaller providers would be reluctant to sign up due to concerns that they would be “writing their own suicide note”.
MPs from across Parliament, including Conservative health select committee chair Sarah Wollaston, also voiced their concern.
However, it appears likely that some providers will sign up to the scheme. VODG has since complained that many learning disability charities have received “ultimatum” letters from HMRC giving them 30 days to decide whether to join.
The insinuation appears to be that HMRC will open investigations into those charities that do not sign up to the scheme, leaving them open to potential court cases, naming and shaming, and additional penalties. Civil Society news understands that a few big name providers will reluctantly sign up before Christmas.
In the meantime, all eyes will remain fixed on Mencap’s next appeal hearing, which is scheduled for March 2018. If the initial ruling against them from 2016 is overturned, the back-pay issue could be killed off, although it will still leave charities with a shortfall going forwards.
If Mencap is unsuccessful, it appears likely the charity will try to appeal again.
It seems that until the severity of the situation is realised by the government, and its silence on social care entirely in the Budget would suggest it currently isn’t, a stalemate over funding will continue, potentially with fatal consequences for some charities.
The National Minimum Wage Regulations 1999. Regulation 15 states:
- In addition to time when a worker is working, time work includes time when a worker is available at or near a place of work, other than his home, for the purpose of doing time work and is required to be available for such work except that, in relation to a worker who by arrangement sleeps at or near a place of work, time during the hours he is permitted to sleep shall only be treated as being time work when the worker is awake for the purpose of working.
The National Minimum Wage Regulations 2015, Regulation 32 states:
- Time work includes hours when a worker is available, and required to be available, at or near a place of work for the purposes of working unless the worker is at home.
- In paragraph (1), hours when a worker is “available” only includes hours when the worker is awake for the purposes of working, even if a worker by arrangement sleeps at or near a place of work and the employer provides suitable facilities for sleeping.
