The professional association for homecare providers
Commissioning and
National Minimum Wage
Colin Angel, Policy Director
@ukhca
@colintwangel
What’s happening with
commissioning

Continued downward pressure on rates

Use of unsustainable maximum prices in tenders

Impact of travel time:
 15-minute visits are 14-16% of all purchase

Polarisation in local markets:
 Either: reduced numbers of “approved providers”
 Or: Volume fragmented across large framework agreements
@ukhca
@colintwangel
Directors of Adult Social
Services predict…

Increased unmet care needs

More legal challenges

Providers in financial difficulty

Reduced ability to ease pressures on health
Source: ADASS Budget Survey 2014
@ukhca
@colintwangel
Issues for the homecare sector

Workers’ terms & conditions:
 HMRC report on National Minimum Wage compliance
 High use of zero-hours contracts

Worker recruitment:
 Ability to recruit workers
 Costs of implementing “Care Certificate” (Cavendish)

Public perception:
 Adverse media coverage over quality
@ukhca
@colintwangel
Why National Minimum Wage
is in focus

Increased investigations by HMRC triggered by:
 Workers contacting the Pay and Work Rights Helpline
 Intelligence about non-compliance from 3rd parties
 Risk-based assessment of providers by HMRC

Increasing media attention:
 Alleged non-payment of careworkers’ travel time
 HMRC report – November 2013
 Provider told to repay >£600k arrears to almost 3,000 workers
 Recent publicity on zero-hours contracts
@ukhca
@colintwangel
Why is NMW-compliance so
important?

Scrutiny by HMRC is intensive and time-consuming:
 Possibly 2+ years of scrutiny and uncertainty

Commercial damage if found non-compliant:
 Repayment of arrears to workers at current rates
 Fines of 50% or 100% of arrears (min: £100, max: £20k)
 New rules to “name and shame” offenders in public

Reputation of entire homecare sector at risk
@ukhca
@colintwangel
HMRC’s investigations of 224
social care providers (2011-13)
Residential
Homecare
Residential
£70
Under-payment
averages £139/worker
£153
33%
52%
Non-compliance
averages 45%
Homecare
HMRC (2013) National Minimum Wage Compliance in the Social Care Sector
@ukhca
@colintwangel
Reason(s) for NMW non-compliance
in the homecare sector
19
12
2
Unpaid
working
time
Deductions
from pay
1
1
Work
Hourly rates Apprentice
related
below NMW
rates
expenses
HMRC (2013) National Minimum Wage Compliance in the Social Care Sector
@ukhca
@colintwangel
Minimum Wage:
What you need to know

NMW compliance is the employers’ responsibility

The fact that most councils pay low rates solely for “contact
time” is not a defence for breaking the law

It is what happens in practice that counts (not what your
rotas claim should have happened)
@ukhca
@colintwangel
And now for a disclaimer…

This presentation is designed to help employers understand
the underlying concepts of the National Minimum Wage

It focuses on issues which affect homecare providers

It does not constitute a definitive explanation of the law

It is not a substitute for taking appropriate legal advice
@ukhca
@colintwangel
Minimum Wage compliance
(Highly simplified)
Basic rate(s) of pay are used.
Do not rely on unsocial hours premiums
or enhancements for short visits
to achieve compliance with NMW
Total pay before enhancements
Total contact
+ Travel
time + Training
Totaltime
working
time
Time spent
providing care in
the service user’s
home
@ukhca
Average pay
over reference
period of up to
1 month
>=£6.50
Includes: Travel between visits and time
spent on training approved by the employer
Excludes: Journeys to and from worker’s
home and other ‘non-working’ time
@colintwangel
Minimum Wage non-compliance:
The risk factors

Low rates:
 Basic rates around £6.50/hour
 Relying on enhancements for short visits/unsocial hours
 Not changing rates for younger workers on their birthday

Payment for “contact time” only, especially with:
 Large amount of travel time, relative to “contact time”
 Use of very short visits and/or long gaps between them

Other issues:
 Insufficient record-keeping (eg. travel time)
 Deductions for uniforms or accommodation provided
@ukhca
@colintwangel
Know your pay reference period

The “pay reference period” is the same as your
payroll period:
 Eg. weekly, fortnightly or monthly
 However, it cannot be more than monthly

Remember that NMW compliance is based on average pay
 Don’t worry too much about what is paid for each hour worked,
or each individual visit
 Focus on average pay per hour over the reference period
@ukhca
@colintwangel
Understand which pay rates
count towards NMW

It is the lowest hourly rate paid during the reference
period which counts for NMW compliance
 For most workers this will be the 1-hour week-day daytime rate

Don’t try to achieve compliance by relying on:
 Enhancements for unsocial hours, weekends or public holidays
 Enhancements paid for short visits
 Allowances (London weighting, car allowance) or expenses
@ukhca
@colintwangel
Why enhancements and allowances
are excluded from calculations

It is a fundamental principle of the Regulations that a
worker’s basic rate of pay, before enhancements or other
allowances, should not fall below the statutory NMW rate in
any given pay reference period

The payment of premium rates can conceal the fact that,
after premium rate elements of pay are deducted and any
unpaid working time added, a worker’s actual rate of pay
could be below NMW
@ukhca
@colintwangel
Understand “working time”
(Highly simplified)

Working time includes time when the worker is:
 Delivering care (“contact time”)
 Travelling in connection with their work
(by whatever means of transport)
 Waiting to begin a journey, or begin an assignment on arrival
 Undertaking training or supervision

Working time excludes:
 Authorised rest breaks
 Time spent travelling between home and a worker's normal
place of work (or training) and back home again
@ukhca
@colintwangel
Cautions about travel time
If you have to quibble
about what does and
doesn’t count as travel time
in order to achieve NMW,
Adopting a restricted
you are a significant risk of
interpretation of travel time
non-compliance.
is counter-productive. It
may make you feel better,
but won’t help if HMRC are
investigating.
@ukhca
@colintwangel
Payment of travel costs

HMRC can deduct travel costs from total pay if they aren’t
reimbursed by the employer

Sadly, travel costs which are reimbursed don’t increase
total pay for NMW purposes

Recommendation:
 Make a reasonable contribution towards mileage
(cover at least petrol costs)
 Pay standard class tickets/fares at face value
 Don’t rely on mileage rates to achieve NMW-compliance
@ukhca
@colintwangel
Also note

Certain deductions from wages may bring providers into
non-compliance, including:
 Re-payment of uniform costs
 Trying to re-claim training costs
 But repayments for DBS checks are OK

Costs of accommodation provided by the employer:
 There are specific rules for the “accommodation offset”

Lower rates for apprentices and younger workers
 Be careful to adjust rates as soon as they no longer apply
@ukhca
@colintwangel
Identify the different types of
work your staff undertake
Distinguish between four different types of work:

Time Work:
Mostly hourly paid careworkers

Salaried Work:
Mostly office staff

Output Work:
Unlikely to apply in homecare

Unmeasured Work: Mostly “live-in” careworkers
This is important because it affects how NMW compliance is
calculated (esp. sleep-ins)
@ukhca
@colintwangel
UKHCA’s NMW Toolkit
Free resource for UKHCA members

Based on HMRC documents, obtained
under FOI

3 main sections:
 How NMW works in complexity of
homecare services
 How to audit compliance (individuals &
samples of workers)
 Suggested actions to achieve/improve
compliance
www.ukhca.co.uk/downloads.aspx?ID=422
@ukhca
@colintwangel
Assessing your compliance with
National Minimum Wage

If you can’t assess all workers, at least do a sample:
 Repeat regularly, particularly if your pay rates are low
 Select workers who are most at risk of underpayment
 Be especially careful after NMW increases in October
 Keep records of your samples, in case you need for HMRC
 UKHCA’s Toolkit explains how to do this in detail

If you find non-compliance:
 Correct underpayment & do more sampling
@ukhca
@colintwangel
Some suggestions to help maintain
(or achieve) compliance

Good employee relations:
 Explain how workers’ pay is calculated properly
 Take questions about underpayment of NMW seriously

Address travel time and travel costs:
 Efficient rostering; consider use of route optimisation software
 Check your assumptions for travel time are accurate
 Reimburse reasonable travel costs (if you don’t already)

Change rates of pay:
 Increase basic rates, even if that means paying a flat rate
 Pay workers for induction, training and supervision
@ukhca
@colintwangel
UKHCA’s Minimum Price
(February 2014)

BBC Radio 4 finds:
 97 of 101 councils pay
prices below £15.19/hr
 Average minimum rate
£12.26/hr

BBC coverage on:
 Breakfast
 News Channel
 Radio 4 & 5-Live
 Local Radio
@ukhca
@colintwangel
Principles behind our
Minimum Price

Fees calculated solely by reference to “contact time”

Workers receive flat-rate NMW for all “working time”
 Contact time
 Applicable travel time (and reasonable travel costs)
 Supervision and training

Provider can cover:
 NI, pensions, training and holiday pay
 Reasonable operating costs
 Acceptable profit / surplus
@ukhca
@colintwangel
How UKHCA’s minimum price
is calculated
Profit /
surplus
£0.46
Running
the
business
£4.25
Minimum Wage:
Contact
time
£6.50
£6.50
Travel time/hour:
11.4 min
Travel distance:
4.0 miles
Mileage rate:
£0.35/mile
National Insurance:
Holiday Pay:
Pension,
training,
holiday,
NI
£1.88
@ukhca
Training time:
Pensions:
Travel
costs
£1.40
Travel
time
£1.24
Gross margin:
9.5%
12.07%
1.73%
1%
30%
@colintwangel
How can you use UKHCA’s
Minimum Price?

Support discussion with local
commissioners

Send to local councillors
asking why council is paying
below UKHCA’s rate

Use UKHCA’s Costing Model
to calculate your actual costs


www.ukhca.co.uk/CostingModel
Challenge council to openbook costing exercise
@ukhca
@colintwangel
Links to essential information
BIS: Calculating the Minimum Wage
General advice. Basic, but a good introduction to general issues
www.gov.uk/government/publications/calculating-the-minimum-wage
UKHCA: National Minimum Wage Toolkit
(UKHCA members only)
Specialist advice for compliance for homecare providers
www.ukhca.co.uk/downloads.aspx?ID=422
UKHCA: Minimum Price for Homecare
Explains all assumptions used in UKHCA’s £15.74/hour
www.ukhca.co.uk/downloads.aspx?ID=434
UKHCA: Costing Model
Calculates price based on providers’ actual costs
www.ukhca.co.uk/CostingModel
HMRC: National Minimum Wage compliance in the social care
sector
www.gov.uk/government/uploads/system/uploads/attachment_data/file/262269/131125
_Social_Care_Evaluation_2013_ReportNov2013PDF.PDF
@ukhca
@colintwangel
How to contact me
Website:
www.ukhca.co.uk
E-mail:
policy@ukhca.co.uk
Twitter:
@colintwangel and @ukhca
Telephone:
020 8661 8152
@ukhca
@colintwangel