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ReSolve Capital


Posted: 04 May, 2018

Many charities and commercial providers in the care sector provide overnight support to people in need: the elderly, vulnerable and those with learning difficulties. When the national minimum wage was introduced in 1999, government guidance said time spent asleep by care workers providing sleep-in support did not count as work time. Instead, staff were paid a flat rate on-call shift allowance, which became accepted across the sector.  However, recent changes to government guidance as a result of an Employment Tribunal judgement against MenCap in 2016 says that the majority of ‘sleep in’ shifts should be counted as ‘working time’ and therefore paid at National Minimum Wage (NMW) rate per hour for the whole shift.

The increased annual wages cost going forwards has been estimated at £200 million in the learning disability sector alone. With budgets already squeezed by funding cuts this is likely to result in other services provided by some care organisations having to be reduced.

To compound matters, care providers have been informed by HMRC that they are also liable for up to 6 years’ back pay for those workers who were paid less than the NMW during that period. Research conducted by the Voluntary Organisations Disability Group estimates a liability of £400 million for back-pay, and there are fears that such an enormous bill could force some providers into insolvency. Many charities, commentators and campaigners are now challenging the government to commit additional funds to relieve the financial burden of back-pay liabilities, citing the inadequacy of the government’s misleading guidance issued at the time.

In a better-late-than-never effort to resolve the situation the government introduced a voluntary scheme, the Social Care Compliance Scheme (SCCS), in November 2017 which allows care employers up to a year to assess their back pay liabilities and a further three months to pay, with a backstop deadline of 31 March 2019. However, reaction to the SCCS has been a mixture of anger and confusion, with more cynical commentators suggesting the scheme simply allows already stretched care providers to calculate the extent of their own insolvency. Last month Mencap went to the Court of Appeal seeking to reverse the original 2016 Employment Tribunal judgement, and unless they are successful, many organisations in the care sector face unaffordable retrospective liabilities and uncertain futures.

With our flexible in-house investment fund and deep restructuring expertise, ReSolve is uniquely positioned to help care providers with unaffordable back-pay liabilities, and we have already been approached by several profitable, well-run care providers for advice on how best to deal with this industry-wide problem that is not of their own making.

If you, or any of your clients in this sector, are experiencing difficulties and would like to discuss options, without charge or obligation, please contact us. http://www.resolvegroupuk.com/


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