skip to Main Content

National minimum wage – judgement on whether sleep-in shifts counts as working time

Judgement

The Supreme Court have dismissed the appeal in Royal Mencap Society v Tomlinson Blake.

Background

The case is fundamentally about what counts as working time for national minimum wage (NMW) purposes. Particularly, the case centres on ‘sleep-in’ shifts and whether an employee’s working time and entitlement to NMW is restricted to the period they are awake and working, or whether they should receiving NMW for the time spent sleeping.

The decision in the lower courts (Court of Appeal) held that working time is only counted for the period the employee is awake and working.

There is also an important distinction to be made between sleep-in shifts that provide dedicated sleeping facilities and those that do not provide sleeping facilities, but still allow employees to sleep during their shift while not required to be working. If employees are not provided with sleeping facilities, then they should receive NMW for entire duration of their shift – regardless of whether that time is spent sleeping. This point is not in issue as part of the Mencap case.

Given the length of time taken for the legal proceedings to address the issue around sleep-in shifts, HMRC allowed employers to enter into a specific scheme to avoid the worst of the NMW non-compliance penalties called the Social Care Compliance Scheme (SCCS). Employers who joined this scheme, were required to make good the calculated underpayments of NMW in relation to the time spent sleeping.

Those who signed up for and complied with the SCCS were able to avoid the 200% penalty on the underpayments, as well as avoid the public naming and shaming by HMRC for NMW underpayment.

Implications

A survey of the care sector conducted in 2018 found that only 7% of workers working sleep-in shifts were being paid NMW for the entirety of their shift. Had the appeal not been dismissed, the implications for the care sector alone would have been massive, as HMRC can require an employer to correct for NMW underpayments going back up to six years, for both current and former employees.

Many businesses waiting on an outcome in this case will have been providing for a contingent liability in their accounts, with the decision now reached and subject to a wider reason for the provision, those business can now look to remove the provision.

Those who made good underpayments under the SCCS are unlikely to have much recourse to recover payments made to employees as part of their obligations to qualify for the SCCS.

The key thing to come out of today’s ruling is for the future of sleep-in work and both employees and employers, will now have certainty on the payments due while undertaking sleep in work.

Wider national minimum wage changes

This week we have seen Uber reacting to the implications of their own Supreme Court ruling, with it guaranteeing that it’s workers will now having an earnings ‘floor’ of at least NMW, to ensure that they are paid NMW – along with other rights such as an entitlement to a pension and holiday pay (albeit, rolled up holiday pay).

While Uber’s workers are now in receipt of minimum wage, it is important to remember that the middle ground ‘worker’ employment status that exists for employment law purposes, has no equivalent for tax purposes, meaning workers can be either employees or self-employed. It will therefore be interesting to see whether Uber is now challenged over the tax status of their workers, which will not only have implications for Uber but also for those reliant upon gig workers.

The National Living Wage will become payable to those aged 23 and over from 1 April 2021, down from those aged 25 and over currently. In addition, we will see all NMW rates increase from the 1 April in line with the Chancellor’s aim to ensure NMW is equal to two thirds of median wages by 2024.

With the new rates due to come into force shortly, it is important to remember the rate of NMW paid to an employee for a pay reference period, is the rate payable on the first day of the pay reference period. A pay reference period is the period of work the payment covers, rather than the actual pay day. For instance, if an employee receives pay on the last Friday of the month, relating to work performed from the 16th of the month, to the 15th of the following month, the pay reference period is the 16th – 15th.

Following on from the above example, with the rate change on the 1 April this year, the impact of the rate change will not apply to an employee’s pay until 16th April, meaning the employee will not see the benefits of the rate rise until they are paid on the 28th May. This same principle applies to the other NMW related rate changes, i.e. the normal age-related changes, the apprenticeship first anniversary change and age-related apprenticeship change.

If you have any questions on NMW or related employment issues, do not hesitate to get in touch with me or Steve Ashworth.

FEATURING: Scott Campbell
Scott joined PKF Francis Clark in 2014, he is a chartered tax adviser and tax director in the employer solutions team. He specialises in all… read more
Back To Top