A number of charities who provide 24-hour care, seven days a week, face insolvency due to a court ruling on the payment of the National Minimum Wage (NMW).

Demands by HM Revenue & Customs (HMRC) for six years of back pay for home helps could ruin many charities. Around 200 organisations, including Mencap, are being forced to pay over up to £400m in pay.

Government guidance issued in 1999, when the NMW was introduced, said disability charities which sent a carer overnight to look after someone with learning difficulties would have to pay only a single sum of £25 or £35 to cover the period when they were asleep.

But recent tribunal cases have required the government to update its guidance to say these organisations must now pay the minimum wage throughout the shift, meaning that home carers would earn £60 for eight hours of sleep.

A 2017 tribunal judge said: “The question at the heart of the appeals is whether employees who sleep-in in order to carry out duties if required, engage in ‘time work’ for the full duration of the sleep-in shift or whether they are working for national minimum wage payment purposes only when they are awake to carry out any relevant duties.”

The judge stated that where there was a regulatory obligation to have someone on the premises, their responsibility throughout the sleeping shift was to remain present throughout and to keep a listening ear and exercise professional judgment as to whether or not to intervene, and if required to act straightaway.

The judge added that the employment tribunal was “entitled to conclude that the claimant was performing the role of a carer during the sleep-in shift, whether asleep or not and I can detect no error of law or approach in that conclusion.”

HMRC is now serving relevant charities with enforcement notices for the back pay to be paid.

Mencap and others have warned that they cannot afford these sums and have asked the Treasury to help fund the black hole. They also want the government to halt the enforcement notices until an appeal court hearing in March 2018, and for local councils to pay more for future care contracts.

The government says it is considering the issue.

Should you wish to discuss the issues raised in this article, please contact a member of our insolvency team.

Related item

The logo for Kreston International British accountancy awards finalist 2016 logo ICAEW logo Sunday Times Top 100 Best Companies 2018 logo Cyber Essentials plus logo