Our Employment law Associate, David Sheppard, takes a look at why organisations that provide care for people with learning difficulties face financial uncertainty.

As reported by the BBC this week, organisations that provide care for people with learning disabilities, including Mencap, are facing financial difficulty - due to arrears in minimum wage payments they owe their workers.

Since 1999, workers have been entitled to a minimum hourly rate of pay. Until recently, it was widespread practice within the care sector that workers attending ‘sleep-in’ shifts at residential homes, typically 8 or 9 hours in duration, would be paid a flat fee of around £30.   But, in 2016, HMRC determined that sleep-in shifts also counted as working time for the purposes of the minimum wage, meaning that every care worker should’ve been paid around at least £60 for each sleep-in shift they attended.

In July 2017, the Government recognised that its previous guidance on the minimum wage in this area was potentially misleading, and agreed to waive any penalties that care sector employers would have to pay for underpayment of wages made prior to 27 July 2017. However, those employers still remain on the hook for 6 years' underpaid wages - totalling around £400m across the industry. Enforcement action against care sector employers is currently timetabled to commence on 2 October 2017.

If unresolved, this pay bill could have a devastating effect on the care sector. Mencap alone could be liable for potentially £20m. Unless this debt is met by the Government, it’ll cause chaos to services and will have to be taken over by local authorities. Despite enforcement action being less than a month away, the Government hasn’t published any further details or proposals. The Government has informed the BBC that it ‘hopes to provide further clarify in the coming weeks’.

The crisis facing the care sector is a stark warning to other employers and sectors. It is essential to ensure full compliance with the minimum wage regulations, in all circumstances. The accumulation of modest underpayments during shifts can have a potentially catastrophic effect if they take place over time and across large workforces.