Healthcare providers, do you know the answers to the following five questions?
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If you are unsure about any of the above, you may be unwittingly failing to pay your workers the national minimum wage and be vulnerable to penalties.
Here we look at why HMRC is circling healthcare on the issue of NMW, and what providers can do to ensure their workers are paid their due rate.
Named and shamed for underpayment
In August 2021, HMRC named and shamed 191 companies, including many household names, for failing to pay their workers the national minimum wage. The offensive resulted in £2.1 million of back payments and a further £3.2 million of further fines.
The crackdown aims to create fair conditions for the UK’s lowest-paid workers and is particularly relevant given the ending of the £20-a-week universal credit boost that has hit many households.
Why the national minimum wage is tripping up healthcare
HMRC admits that “not all minimum wage underpayments are intentional”, and this has been the experience of several of our clients. This is because the healthcare sector has several characteristics that make it complex for employers to accurately calculate NMW. Examples include:
Sleep-ins
The healthcare sector has a disproportionate number of job roles that require an employee to stay overnight. These include care home wardens and night care assistants. In March 2021, the UK Supreme Court ruled that when calculating the NMW, the number of hours worked does not include the hours that a worker is permitted to sleep unless they are awake to work. Employers must therefore have an accurate way of recording when their staff have been awake and working during the night.
Travel time
Home care workers, who visit several patients in one day, will have travel time between appointments which is working time for NMW purposes and for which they are entitled to be paid. However, the exact journey-parts for which they are allowed to charge is a complex matrix of whether a journey is to home, work, a further appointment or a break. As with sleep-ins, the challenge for home care providers is how to accurately record eligible travel hours.
Training
National minimum wage legislation determines what payments to take into account in a worker's total pay for NMW purposes and also what deductions are allowed to reduce this pay. Any other deductions will breach NMW legislation if they take the pay below minimum wage – this includes deductions from a salary for employment-related training, even if it has been agreed by contract in advance.
When training is undertaken prior to commencing work, care must be taken to distinguish whether this is considered employment-related training or part of a pre-selection process. Even then, there is a risk that the deduction could result in a worker’s salary falling below the NMW threshold.
Salary sacrifice and the national minimum wage
Data collected by the charity Skills for Care for its 2021 report showed that an estimated 6.8% of the roles in adult social care were vacant in 2020/21, equal to approximately 105,000 vacancies at any one time. This has been exacerbated by the requirement for all care home workers under the Quality Care Commission to be double-vaccinated.
While better-salaried industries might tackle a staffing shortage by offering employment benefits funded by salary sacrifice, healthcare has its hands tied. From a baseline of typically low wages, it is difficult for healthcare providers to deduct the cost of benefits without breaching NMW restrictions.
For example, a well-intentioned employer deducting travel pass expenses as a salary sacrifice to aid its workers could find itself facing a fine if that deduction takes pay below national minimum wage. This is also the case for other deductions, such as costs for uniforms or a subsidised staff canteen.
Easy mistake, serious consequences
It starts with the HMRC brown envelope, alerting you that you are under review for failing to pay the minimum wage. What follows is an investigation, of potentially up to two years, raking over the last six years of payroll records. If you are guilty, you must pay arrears to impacted workers at current minimum wage rates and face further penalties of up to 200% of arrears.
In April 2022, the Health and Social Care Levy will increase National Insurance Contributions for both employers and staff. Although the levy will increase the funding coming into the system in the longer term, initially there will be additional salary and cost pressures. Coupled with the other NMW challenges facing healthcare, this means that providers cannot afford a misstep when it comes to paying the national minimum wage.
Read more about the Health and Social Care Levy →
Avoiding the brown envelope
To ensure national minimum wage compliance, avoid inadvertent breaches and reduce the risk of an HMRC review, it is vital to have robust compliance and governance systems in place.
Conducting a regular audit of all the factors – including the questions at the start of this piece – will help identify potential underpayment issues. A high-level assessment should also be carried out once a year and on any change in policy or reward structure. NMW assurance can be done independently following HMRC’s guidelines or with the help of a third-party adviser as a light-touch review or full mirroring of an HMRC style review.
The time and cost dedicated to a regular national minimum wage health check will by far offset the resources, business disruption, reputational damage and fines associated with an HMRC review.
For further help or to book a NMW health check, contact Peter Jennings.
