National minimum wage

17 July 2017

The National Minimum Wage (NMW) applies to all workers and employees for any time spent ‘working’. However, many organisations are unclear whether time their workforce spend sleeping overnight at or near a place of work is working time or not for NMW purposes.

In some sectors, for example healthcare, it has been an accepted practice that workers required to sleep at their place of work, but who do not do work unless in an emergency, are paid a flat rate of pay for the night irrespective of whether, during that period, they are asleep or actively working. When the hours spent, sleeping are factored in, the flat rate paid often averages out on an hourly basis at well below NMW. Any time they are awake dealing with an emergency though, is considered working time for which they are paid their normal hourly rate in addition to the flat rate.

Recently, this practice has faced a number of challenges in the employment tribunal on the basis that time spent sleeping is working time, all hours of which the worker should be receiving NMW. This is not an issue if salaries or hourly rates are high enough such that, when averaging out the number of hours worked, the workers are still paid at least NMW for all hours they are committing to the business. However, if the worker is already being paid at or near NMW there is a risk this practice breaches NMW.

How could this affect schools?

Many independent schools, in particular those with boarding facilities, employ workers to live on or very near their place of work so they can deal with any incidents/emergencies during the night. This does not necessarily mean the time they spend sleeping will be working time for the purposes of paying NMW. Case law has demonstrated that there is no hard and fast rule, but that each case will be considered on its circumstances. However, those who pay at or near NMW and either adopt practices of paying a flat rate for sleep-in shifts or make no payment for them at all should consider possible breaches of NMW.

The crucial issue is whether the mere presence of the worker on site is part of the job. Critical factors which may indicate that time spent sleeping is working time are where:

  • there is a legal or regulatory requirement for the worker to be on site;
  • disciplinary action might be taken if the worker leaves the site;
  • a high degree of responsibility is delegated to the worker; and
  • the worker is there to provide an immediate response to any incidents/emergencies throughout the night.

Many schools will offer accommodation as part of their remuneration package which allows a weekly offset of £44.80 against NMW. Where a houseparent is also engaged as a teacher, their salary will be higher, and combined with the accommodation offset, is likely to exceed the NMW obligations. Some schools, however, engage gap year students on relatively low wages, who take on out of hours duties which enable their accommodation to be offered on the basis that they are exempt from a taxable benefit in kind. Furthermore, some schools will engage the spouse of a teaching houseparent for night time duties. The lower salaries that may apply in these situations present a risk of schools being in breach of their NMW obligations.

Consequences of failing to meet NMW obligations

Independent schools have been the subject of HMRC employer compliance reviews over the past few years, but despite NMW obligations being enforced by HMRC, little focus has been placed on this until recently.

It should be noted that the failure to pay NMW has serious consequences to an employer in terms of:

  • a penalty of up to £20,000 per underpaid worker;
  • an order for the underpayment of NMW to be paid to affected workers; and
  • public naming and shaming.

Next steps?

Download the full report for our key considerations and steps.