Commissioning and National Minimum Wage

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Presentation transcript:

Commissioning and National Minimum Wage Colin Angel, Policy Director

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

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

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

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 f

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

HMRC’s investigations of 224 social care providers (2011-13) Non-compliance averages 45% Under-payment averages £139/worker HMRC (2013) National Minimum Wage Compliance in the Social Care Sector

Reason(s) for NMW non-compliance in the homecare sector HMRC (2013) National Minimum Wage Compliance in the Social Care Sector

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)

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

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 Average pay over reference period of up to 1 month Total pay before enhancements >=£6.50 Total contact time Total working time + Travel time + Training Time spent providing care in the service user’s home 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

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

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

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

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

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

Cautions about travel time If you have to quibble about what does and doesn’t count as travel time in order to achieve NMW, you are a significant risk of non-compliance. Adopting a restricted interpretation of travel time is counter-productive. It may make you feel better, but won’t help if HMRC are investigating.

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

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

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’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

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

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’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

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

How UKHCA’s minimum price is calculated Minimum Wage: £6.50 Travel time/hour: 11.4 min Travel distance: 4.0 miles Mileage rate: £0.35/mile National Insurance: 9.5% Holiday Pay: 12.07% Training time: 1.73% Pensions: 1% Gross margin: 30%

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 open- book costing exercise

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

@colintwangel and @ukhca How to contact me Website: www.ukhca.co.uk E-mail: policy@ukhca.co.uk Twitter: @colintwangel and @ukhca Telephone: 020 8661 8152