In spring 2017, Hazlewoods Chartered Accountants and Business Advisers reviewed how changes in the National Living Wage (NLW), coupled with an increasing number of employment tribunal decisions, are pushing employment costs ever upwards.
Although tribunal decisions have moved on since the spring, the outcomes from the NLW changes are moving in the same direction, and social care operators should take advice based on recent findings.
The introduction of the NLW from April 2015 and the increase to £7.50 per hour with effect from April 2017 leaves this Osborne policy legacy on track for hitting the aspiration of £9 per hour, or close to it, for all employees over 25 by 2020. This above-inflation increase, coupled with changes to the personal tax regime, is seeing low-paid workers enjoy quite significant increases in their pay, at little cost to the Exchequer.
For providers, however, the impact of this together with recent judicial and indeed HMRC guidance, creates a rather bleak picture when coupled with the social care funding crisis that local authorities are experiencing. What is noticeable is that despite the increasingly worker-friendly message, the reality of care commissioning is that councils are reticent to pay providers in a way that mirrors the experience of operators. Below are examples of this in action.
Local authorities have long been happy to commission sleep-in shifts, as these have been perceived as a cost-effective way of delivering night staffing while staff may not actually be required for a large proportion of the shift in question. Historically, local authorities could commission sleep-in shifts where the care workers were paid at rates of between £30 and £45 per night.
In recent months, we have noted that HMRC consider that employees should be paid at the minimum wage for sleep-in duties. Effectively, this suggests that there should be no distinction between a sleep-in shift and a waking night. The approach from HMRC has been very aggressive in many cases. We have many clients who operate sleep-ins and are looking at ways to mitigate this risk/cost. We have seen a number of very robust arguments put forward in relation not only to HMRC’s approach, but also to things that can be done to mitigate the risk.
In practice, however, commissioners have not revised the effective hourly rates paid for sleep-in support to be commensurate with daytime and waking night shifts (presumably given budgetary pressures). In response to this, we have seen one local authority, where the hourly rate for daytime care was £13.38 per hour, increase its sleep-in allowance to £8.58 per hour (its sleep-in allowance was previously £37.19 per night, typically for a 9.5 hour shift). The increased rate is only payable to providers who pay their staff at NLW or NMW rates.
So while the reality is that, for the employer, the cost of employing a member of staff for a daytime or sleep-in shift could well be the same, the fee receivable is very different!
It is now broadly accepted that travel time for workers travelling between appointments should be treated as working time for the purposes of determining the number of hours when calculating the average rate. Recent cases that have gone to tribunal, coupled with HMRC PAYE inspections, have certainly brought this into sharp focus.
That said, Local Authorities are still frequently commissioning home-care visits of 15 minutes or less, where it is a challenge to deliver a safe and appropriate service. The ability to fund travel time across multiple short visits is therefore a real headache for operators, particularly those in rural areas.
Training time (including time spent travelling when it is not simply a case of travelling from home to work) can, and generally does, count as ‘working time’ for NLW or NMW. If time spent training is deemed to be working time, it must be paid at the appropriate rate.
For social care operators, the question of sustainability of service delivery, once the above factors are considered, has been brought into sharp focus. This pressure is heightened when HMRC’s investigations and attitude are taken into account.
While the social care levy on council tax gives local authorities a degree of latitude in future fee settlements with providers, we believe there is a lot to be done on costings and negotiating with Local Authorities. In addition, operators need to be ever more thoughtful about the ways in which they manage their biggest asset, their staff. It is vital to spend more time thinking about how to develop your business and what the right approach is. We see very many care businesses and learn lots from our clients and would be happy to discuss our insight with you.
Healthcare Group, July 2017