1. Commissioning and National Minimum Wage
Colin Angel, Policy Director

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

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

9. 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)

10. 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

11. 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

12. 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

13. 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

14. 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

15. 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

16. 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

17. 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.

18. 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

19. 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

20. 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)

21. 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

22. 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

23. 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

24. 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

25. 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

26. 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%

27. 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
Challenge council to open- book costing exercise

28. Links to essential information
BIS: Calculating the Minimum Wage General advice. Basic, but a good introduction to general issues UKHCA: National Minimum Wage Toolkit (UKHCA members only) Specialist advice for compliance for homecare providers UKHCA: Minimum Price for Homecare Explains all assumptions used in UKHCA’s £15.74/hour UKHCA: Costing Model Calculates price based on providers’ actual costs HMRC: National Minimum Wage compliance in the social care sector _Social_Care_Evaluation_2013_ReportNov2013PDF.PDF

29. @colintwangel and @ukhca
How to contact me
Website:
Twitter:
@colintwangel
Telephone: