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28 March 2019 0 Comments
Posted in Health & Social Care, Opinion

Our important employment law update for care providers

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In this important update for care providers we will look at:

• new government guidance on how to calculate holiday pay
• Mencap sleep-in case heads to the Supreme Court
• new National Minimum Wage increases, and
• new penalty charges for “aggravated” breaches of employment rights.

New government guidance on calculating holiday pay

The Government has issued new guidance to help employers calculate holiday pay, following an investigation that found high levels of non-compliance.

A key area of non-compliance highlighted in the Government report is holiday pay calculations for staff without fixed hours or pay. This particularly affects the care sector because so many care staff work irregular hours and overtime and often receive shift premiums for working ‘unsociable’ hours.

Where staff do not have fixed hours or pay, it is not permissible to calculate holiday pay based on their contracted hours. Workers should receive their “normal remuneration” when taking holiday. In other words, holiday pay should reflect what staff would have been paid if they had been at work and should reflect overtime payments and other allowances (e.g. sleep-in payments) the worker would have received had they been at work.

These rules only apply to the 4 weeks’ holiday provided by the European Working Time Directive (‘the Directive’); not the additional 1.6 weeks’ holiday provided by the UK Working Time Regulations (‘the Working Time Regulations’). It is therefore possible to pay the 4 weeks’ holiday provided by the Directive based on normal remuneration and the 1.6 weeks’ holiday provided by the Working Time Regulations based on contracted hours. This might provide a financial saving but could be onerous to administer in practice.

Where staff do not have fixed hours or pay you are required to calculate holiday pay using a 12 week average of their pay. Each time holiday is taken you should calculate average pay over the previous 12 weeks and pay staff that rate of pay during their holiday. The rules for calculating average pay are complex and you should seek specialist advice for further details.

It is important that you audit your holiday pay calculations for the following reasons:

  • workers will have claims for unlawful deductions of wages in the employment tribunal if their holiday pay has been incorrectly calculated and can claim for 2 years’ back pay
  • if a worker becomes aware of your non-compliance it may lead to a group claim by all staff which could be costly and disruptive, or
  • if you are thinking of selling your business you could have to give onerous indemnity protection to the purchaser and/or allow the purchaser to retain part of the purchase price to cover the risk of claims.

If you would like support with carrying out an audit please get in touch. We also offer a free review of employment contracts.


Social care sector plunged back into uncertainty as Mencap case heads to the Supreme Court

The Supreme Court has granted Unison (which represents sleep-in staff at Mencap) permission to appeal the Court of Appeal ruling that sleep-in shifts were not subject to the National Minimum Wage.

There has been no official confirmation of when the appeal will be heard by the Supreme Court but indicators point to a date after October 2019, at the earliest.

The decision to allow the appeal will cause significant anxiety in the sector, with estimated back-pay liability being £400 million if the Court of Appeal ruling is reversed.

For providers who joined the Social Care Compliance Scheme, the deadline has passed to submit declarations of compliance (or non-compliance) to HMRC. Most providers will have submitted a nil return, declaring that they are compliant with the National Minimum Wage on the basis that sleep-in time is not subject to the National Minimum Wage. If the ruling changes on appeal, HMRC is likely to require providers to re-submit declarations with sleep-in time included in their National Minimum Wage calculations.

If you didn’t join the Social Care Compliance Scheme, but will have sleep-in liabilities if the Supreme Court reverses the Court of Appeal decision, you could have greater financial exposure. This is because the 200% penalties that HMRC usually imposes in the event of non-compliance have only been written off for non-compliance prior to 26 July 2017. Any non-compliance after that time will attract 200% penalties, unless you joined the SCCS which provides protection against these penalties.

It is imperative that the Government starts planning for the eventuality of a successful appeal now, and in particular how it will support providers faced with significant liabilities and ensure the sustainability of the market.

It has been concerning to hear that since the Court of Appeal ruling some local authorities have (or are planning to) reduce sleep-in rates paid to providers, whilst others have decided not to increase rates as previously planned. Given the uncertainty over sleep-in payments, providers need to pay the National Minimum Wage equivalent for sleep-in shifts to ensure that they are not accruing further liability for non-compliance in the event that the Supreme Court reverses the Court of Appeal ruling.

Don’t forget – changes coming in April 2019 for all employers

The new rates from 1 April 2019 are as follows:

National Living Wage (per hour)
Age 25+
Standard adult rate (per hour)
Age 21+
Development rate
(per hour)
Age 18-20
Young workers rate (per hour)
Age 16-17
Apprentice rate (per hour) Accommodation offset limit (maximum daily deduction from NMW)
1 April 2019 £8.21 £7.70 £6.15 £4.35 £3.90 £7.55


This represents an increase of almost 5% and, together with increasing pension costs, will significantly increase overall staffing costs. Given that local authority fee rates have failed to keep up with increasing costs, we envisage some providers being unable to maintain current pay differentials for senior staff which is likely to exacerbate existing recruitment and retention challenges. Care staff deserve a fair rate of pay but local authority rates need to reflect these increased costs.

Increase in maximum penalty for an “aggravated” breach of employment rights

If an employment tribunal finds that an employer has breached the claimant’s rights, the tribunal can order the employer to pay a financial penalty if it believes there are aggravating features. This penalty is in addition to any compensation awarded to the claimant and is payable to the Secretary of State.

As of 6 April 2019 the maximum penalty for an aggravated breach will increase from £5,000 to £20,000.

It is important that you:

  1. are mindful to avoid conduct that could be seen as purposely antagonistic or autocratic, and
  2. consider providing additional training for those in managerial positions on how to manage difficult circumstances and avoid aggravating any breach.


We can help

We specialise in providing expert employment advice to care providers.

Our advice is provided by a dedicated team of specialist social care lawyers who provide commercial, practical and care specific advice.

For further details please contact James Sage on:

01225 730 231     Email

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