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National Minimum Wage - Changes and Pitfalls
With effect from October 2008, the National Minimum Wage has been applied as follows:
Workers aged 22 & over £5.73 per hour
Workers aged 18 - 21 £4.77 per hour
Workers aged 16 - 17 £3.53 per hour
Accommodation offset £4.46 per day (£31.22 per week)
Consultation regarding the National Minimum Wage is made early each year and any changes are effective in October.
Historically the Low Pay Commission has produced a report for presentation to the Government by 31 March, for announcement in April.
This year, the Low Pay Commission requested in January that they be granted an extension to the consultation period to May 2009 before reporting to the Government on their proposals. This is impacting on negotiations with regards to fee rates with providers for the provision of care, as the
National Minimum Wage levels for the second half of the 2009/10 year have not yet been announced.
Sleep-In Arrangements
There has been an increase in the number of investigations into the National Minimum Wage in recent months, which have focused on Sleep-In payments. We have seen tribunals find in favour of employees where they have demanded National
Minimum Wage for Sleep-Ins.
In addition, we have heard from clients that HM Revenue & Customs have requested copies of rotas, timesheets and contracts of employment when undertaking payroll tax reviews. In some cases organisations have been told that they do not comply and have suffered large, retrospective tax claims on underpaid PAYE & NI, as well as a significant increase in their operating costs.
Accommodation Offset
A note of caution for all care operators who provide accommodation to workers.
If workers are being charged to live-in, then the Accommodation Offset provision may well apply. An Accommodation Offset provision also applies as a protective
measure to prevent employers levying apparent “excessive” accommodation charges.
It is also to ensure that workers are mostly remunerated in cash for their services as opposed to accommodation benefits (hence the offset is capped at a low level).
Under the National Minimum Wage, only the provision of accommodation is permitted as a benefit counting towards the National Minimum Wage. This provision is the Accommodation Offset which is currently £4.46 per day or £31.22 per week.
Where no charge is levied for accommodation, the notional value of accommodation offset counts towards the National Minimum Wage - the effect being that a worker's contractual pay can be less than the National Minimum Wage.
Where an employer charges for accommodation, the National Minimum Wage is only affected if the charge is more than the accommodation offset (ie where
the charge for accommodation exceeds £31.22).
In essence, if the charge for accommodation exceeds the accommodation offset to the extent that it reduces a worker’s pay level to below the National Minimum Wage, then arrears may be payable to the worker for the underpayment and the tax and NIC contribution shortfall paid over to H M Revenue & Customs.
We would encourage all care operators to consider whether these provisions may apply to their business.
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