Questions about HMRC’s Social Care Compliance Scheme (SCCS) have been raised following the Court of Appeal’s decision that staff required to sleep-in are not entitled to the National Minimum Wage (NMW).
SCCS was introduced to allow care providers to avoid the financial penalties and naming and shaming for failing to pay NMW for sleep-ins. It came about after HMRC changed its guidance on sleep-in pay due to emerging case law.
“Historically, HMRC’s guidance had been that sleep-in shifts did not need to be paid at NMW rates. However, HMRC changed its guidance when emerging case law contradicted this,” explained Kevin Barwick, a partner in RSM Legal’s not-for-profit sector group.
“Care sector providers who followed HMRC’s initial guidance were understandably frustrated as it exposed them to the financial penalties and naming and shaming for failing to pay NMW, as well as up to six years’ back pay to current and ex-workers.”
The SCCS was introduced to calm these frustrations. However, following the recent Mencap Court of Appeal case, the scheme has been turned on its head.
Charlie Barnes, an associate director and employment lawyer at RSM Legal, said that the decisions raised a lot of questions, such as whether those who have already paid penalties, back pay or incurred significant costs in calculating underpayments would be compensated. There was also the cost of reputational damage to consider for those who have been named and shamed purely for failing to pay NMW for sleep-ins.
“It also begs the question why HMRC chose not to halt all enforcement action until the outcome of the appeal? Opting into the SCCS still meant care providers had to pay back pay to affected workers,” said Barnes. “Surely, a fairer approach for a sector that was already suffering from cuts in government funding would have been to pause any enforcement of back pay as well as penalties.”
He added that it is possible that an appeal will be launched in the Supreme Court, but that the case demonstrates the complexity of NMW legislation.
Barnes concluded: “A rethink is needed about the current approach taken to enforcement when those who are trying to do the right thing are unfairly punished.”
