National Minimum Wage non-compliance – what are the key risks for the healthcare sector?

Julie Moore, RSM’s National Minimum Wage lead, looks at the impact of the increases to National Living Wage announced in the Autumn Statement for the healthcare sector and highlights key risks for healthcare organisations. 

It was announced in the Autumn Statement that the National Living Wage (‘NLW’) is increasing to £11.44, and this rate now includes workers aged 21 and over. These increases mark the largest increase in National Minimum Wage (‘NMW’) rates to date.

Whilst the increases in NMW are positive, the Living Wage Foundation states that the Real Living Wage (‘RLW’) for 2023/24 is £12 across the UK and £13.15 in London. The RLW is not a legal requirement for employers to pay, however the Living Wage Foundation states that it is the pay rate in the UK based on the costs of living. Despite the NLW/NMW increases, rates still fall short of the recommended rate for which ‘people need to live’. This disparity may lead to employee queries and complaints regarding their hourly pay rate where the Real Living Wage is not being paid. 

HMRC have focused on enforcement activity when it comes to NMW. The strategy paper published by the Director of Labour Market Enforcement (‘DLME’) makes multiple references to the recent successes of the HMRC NMW team in enforcing compliance through their geographical approach. This approach is a regional focus on full NMW compliance checks, where HMRC’s dedicated NMW team is writing directly to employees highlighting common risk areas.

In addition to the above approaches, HMRC have confirmed that they intend to commence their ‘Repeat Visit Programme’ in 2024. This programme will involve HMRC visiting large employers who have either previously been named and shamed for historic non-compliance with NMW or have been provided with recommendations during the course of a NMW visit from HMRC. The aim of these repeat visits is to check that the business remains compliant or has made changes to processes where non-compliance has been identified previously. 

Given that many businesses within the healthcare sector have already been through this process, and many have been ‘named and shamed’ by the Department of Business and Trade, healthcare organisations should be considering and reviewing their NMW compliance position.

The ODLME risk model confirms that the healthcare sector is the only sector where risk has increased over the year, due to ‘greater evidence of deliberate non-compliance’. Additionally, the DLME states that there are ‘concerns for those working in sectors such as care’ and particular risks include ‘not receiving minimum wage’.  There is therefore a risk that HMRC will focus their attention on at risk sectors, such as the healthcare sector in 2024.

NMW risk areas for the healthcare sector

Based on our recent experience of supporting employers in the healthcare sector, some of the key risk areas to consider include the below.

Pay rates

The recent significant increases in NMW/NLW rates impacts the pay differentials across grades for example, healthcare assistant versus carer, versus team leader, etc.

When NMW rates increase, there is a risk that more senior roles who are paid in excess of NMW and who do not receive NMW uplifts automatically, may fall into ‘at risk populations’. This is due to their level of income becoming closer to NMW and the additional responsibilities and working time that come as part of their role.

Working time

How is time and attendance tracked across different employee populations and is all working time accurately captured? From a NMW perspective, it is important that employers capture and can demonstrate all working time to prove that at least NMW has been paid for all time worked. 

Areas such as employees clocking in before the start of their shift, working past the end of their shift, not taking their full break entitlement and/or time spent training can all lead to uncaptured working time. In the healthcare sector, this is particularly relevant where workers are required to stay and complete paperwork or handover before the start/at the end of their shift.

Another risk that impacts the healthcare sector is changing time. If workers are required to change into their uniform prior to and/or after their shift, for example due to health and safety or hygiene reasons, this should be classed as working time and captured as part of a workers shift. 

Travel

It is important for employers to consider a worker’s travel time and whether this should be included as working time. Where workers are required to travel as part of their role, for example home visit care workers, there is a risk that travel time is not accurately captured or considered when reviewing NMW compliance. Due to the nature of some workers’ roles, travel time within the healthcare sector has proven to be a high-risk area and so careful consideration should be given to ensure that any risks are minimised.

Varying working practices

As some healthcare businesses operate nationally, there is a risk that working practices may vary across different regions/areas. Whilst policies and procedures may be consistent these policies may not be commercially feasible in every location and so variations are adopted across different locations.

Dress code

Where there is a dress code or uniform requirement for workers, including PPE, the cost of this can reduce pay for the purposes of NMW if employees are required to purchase items. This can also happen where employees receive a certain allowance towards their uniform requirements, and the allowance doesn’t provide them with enough items of clothing.

Deductions

Where any deductions are made from an employee’s pay there is a risk that these can reduce pay for the purposes of NMW.

How can RSM help?

Our specialist employment tax team supports clients through both self-review exercises and HMRC NMW audits, which can be lengthy due to the technical legislation. The team has a wide range of experience and has worked alongside clients to improve and strengthen their overall processes around NMW compliance. 

If you require any support or would like to discuss NMW in more detail, please do not hesitate to contact Julie Moore.