Children's homes 'could face closure' over backpay bills

The Independent Children's Homes Association (ICHA) surveyed 62 of its members and found that the estimated cost of settling outstanding pay with their employees, due to them not being paid the national minimum wage for sleeping in, ranged from £40,000 to £2m. These costs include any taxes due on that pay.

Providers also told the ICHA that the ongoing cost of paying staff the national minimum wage during sleep-in time ranges from £11,000 to more than £1.4m a year per home.

In May an employment appeal tribunal ruled that care workers required to sleep in at a service user's home are entitled to be paid the national minimum wage for all hours worked, including the hours spent asleep. 

The government has suspended HMRC from enforcing back pay and the minimum wage in the care sector for sleep-in shifts while it decides whether it will provide support to care providers in paying owed sleep-in payments.

The association has warned that the size of bills being faced by providers threatens the stability of children's homes, and could lead to some closing their doors or having to increase their fees.

"This report shows there should be no misunderstanding and misinformation or rhetoric to take away from the gravity of the situation children's homes face," Jonathan Stanley, chief executive of the ICHA, said.

"The evidence is clear. This is a major crisis facing the provision of the care for the most vulnerable young people."

The ICHA has said that children's homes may need to raise their fees to fix the issue but would face opposition from local government.

The government temporarily suspended enforcement action against the residential social care sector in July so it could review the issue in more depth, amid concerns about the impact the back payments and fines levied by HMRC could have. It also said it would waive the financial penalties normally faced by employers who fail to pay the national minimum wage.

On 28 September the government extended that suspension for a further month - until November - to allow it more time to explore ways of minimising the impact of backpay liabilities on the sector.

It also announced that, in the interim, HMRC would be giving additional help to providers to help them review their compliance with the national minimum wage on sleep-in shifts and ensure that workers receive their back pay.

"The ICHA welcomes the extension of the suspension and the government's recognition of the complexity of the situation," said Stanley.

"The complexity of the issue is greater in the children's sector than in adult social care due to the greater diversity of provision and because the sole purchaser of care is the local state and all 150 local authorities imposed a zero per cent fee increase this year."

"To date, there is nothing that has happened yet - and I stress the word yet - that is relieving the anxiety of children's homes. Three quarters of providers are likely to be affected, some greatly.

"Undoubtedly there could be some closures and there are other effects on care as this goes forward, such as less money for things like training in house. The models of care may change too with the numbers [of children] in homes to rise, which would be a regressive step."