Charities fear insolvency following “disastrous” change in policy

Blog Insolvency

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A sizeable number of charities could find themselves at risk of insolvency following a controversial decision which will require them to make back payments to thousands of overnight workers.

It is thought that as many as 200 organisations could face a combined bill of £400million, after guidance was issued to confirm that those employed overnight were entitled to the Minimum Wage for every hour of their shift.

Following this week’s ruling, there are concerns that the costs involved could plunge many of the charities affected into financial crisis.

When Minimum Wage legislation was first introduced almost 20 years ago, disability charities were advised to pay a flat rate “on call allowance” to cover the period of time that carers were asleep.

But following two Tribunal cases, the Department for Business, Energy and Industrial Strategy has changed its guidance and confirmed that organisations will now need to pay the Minimum Wage throughout the entire shift and not just when the carer is awake.

Derek Lewis, chairman of the Royal Mencap Society, raised concerns about the change in policy.

“Sleep-ins are widely used in the learning disability sector to provide care for some of our most vulnerable adults, in their own homes in the communities they live in,” he said.

“The carer is only there ‘just in case’ to provide safety and reassurance and is rarely disturbed. Recent research which looked at the last three years showed that 99.7 per cent of carers slept peacefully.

“The unintended consequences have been disastrous as HMRC have begun enforcement action demanding six years’ back pay. Estimates of the costs to the learning disability sector are in the region of £400million and Royal Mencap Society will be severely affected.”

A Government spokesman said: “The Government is considering this issue extremely carefully and ministers continue to meet with care providers to ensure any action taken to protect workers is fair and proportionate.”