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28th May 2018

Is Your Workforce Microscope Ready?

Those involved in the social care sector be familiar with the issues associated with the calculation of 'sleep-in' payments, in the wake of the Focus Care Agency (Mencap) case. The current position is that a 'multi-factorial test' is required to determine whether a worker is working, merely by being present at the workplace (even if asleep) - but we await the outcome of Mencap's appeal which was heard by the Court of Appeal in March.

However, in reality, the sleep-ins and National Minimum Wage (NMW) issues are one piece of a much bigger jigsaw concerning greater scrutiny of wage compliance; which is likely to have a significant impact across the social care sector.

Whilst it is no secret that the potential impact of sleep-ins for this sector is likely to be a £400m wage bill, employers do need to be getting their houses in order now, given that the Director of Labour Market Enforcement has just published his Labour Market Enforcement Strategy.

The Strategy provides a strong indication of the direction of travel on pay compliance as well as scrutiny and enforcement measures– there will be more.

Key points are as follows:

  • A recommendation that there should be a more supportive approach by HMRC, and NMW / NLW guidance should be reviewed to address difficulties currently faced by employers in getting definitive help and answers from HMRC on these issues.
  • A recommendation for a substantial increase in penalties and more pro-active enforcement, including greater publicity of prosecutions.
  • The focus is not only on minimum wage issues. The Director is recommending that holiday pay enforcement should be ramped up, starting with the creation of a new holiday pay enforcement body.

In terms of next steps, it is now for the government to consider the recommendations, which is very likely to dovetail with the current consultations being undertaken in the wake of the Good Work report by Matthew Taylor.

Although employers should welcome the lack of legislative reforms suggested in the report, and the recommendation of a more collaborative approach from HMRC, it is clear that the current focus on pay scrutiny is set to continue. With increased financial penalties and publicity on the horizon, now is the time to undertake a comprehensive pay compliance audit to feed into any review around potential liabilities and budget allocations for any arrears.

We are regularly assisting clients with navigating the legal framework and audits, and providing advice and support to steer care sector employers through HMRC pay investigations and legal claims.

*All information is correct at the time of publishing

Jodie Sinclair

Bevan Brittan LLP, Legal Partners

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