National Minimum Wage (NMW) – HMRC target care workers

HMRC are writing to employers in the care sector advising them to carry out a full review of compliance to ensure current and former employees have been paid the statutory level of NMW. Whilst most employers pay workers above the headline NMW rate, inadvertent breaches of NMW compliance can occur because of a misunderstanding of the rules. This article summarises what employers need to know, and how they could prepare for an HMRC review. 

HMRC are contacting businesses in the care sector and, for those contacted, this is likely to lead to a formal NMW review being opened over the next 12 months.  Workers of the care home could also be approached as part of the review.

HMRC have targeted the care sector in the past as part of the Social Care Compliance Scheme, and it is important to understand that employers that participated in the scheme will not be protected from further HMRC scrutiny under this latest initiative.

As part of the new initiative, NMW enforcement officers are targeting ‘local management’ rather than Head Office.

Whilst most employers pay workers above the headline NMW rate, inadvertent breaches of NMW compliance can occur because of a misunderstanding of the rules. Where breaches are identified, employers are named and penalties of 200 percent of the underpayment are due.

HMRC have provided a high-level checklist to support employers to review compliance, which includes the following areas:

• Deductions from pay for items or expenses connected with the job;
• Paying workers for all of the time they have worked (including travel and training which may be undertaken at home);
• Apprentices; and
• Deductions or payments for accommodation.

As you may be aware, many care providers will have been subject to a review during the past six years following HMRC’s enforcement activity on sleep-in arrangements. The latest initiative will focus on all risks that might impact working time and pay which may not have been subject to a detailed review during the last inspection.

If you have been reviewed during the past six years, we recommend that you check to ensure this covered all risk areas (experience tells us that most of the previous NMW inspections into the sector were predominantly focused on sleep-ins with little or no focus on other areas) and consider how recent changes in NMW legislation might affect you. Recent changes to the rules for salaried workers, which can generate underpayments for workers paid as high as £50,000 per annum, have prompted HMRC to focus on managerial and Head Office roles.

Where HMRC carried out a previous inspection, review the recommendations for improving compliance to ensure they have been implemented, as HMRC will include this as part of their review. 

Review the HMRC checklist, however you should bear in mind that this is a summary of common causes of underpayments. It is not an exhaustive list of issues that might give rise to an underpayment or how you should consider reviewing the risk, in particular, how issues such as training time might be measured for care sector workers.

Communicate with local management of each group entity to ensure they notify Head Office if HMRC make contact.

Our team of multi-disciplinary employment tax and payroll experts continue to provide support to many care providers during HMRC reviews. Please do reach out to the authors or your usual KPMG in the UK contact with any queries you may have.

For further information please contact:

• Josiah Greenall
• Gareth Dennett