Two recent developments have highlighted the difficulties employers can face with payments for employees who sleep on site.
Round the clock care
In the social care sector it is common for providers to have to arrange 24 hour care for their clients – at their homes or in dedicated residential care facilities. It was common practice for such workers to be paid a flat-rate allowance per shift to cover the hours that they were on site but actually sleeping.
In May 2017, an Employment Appeal Tribunal ruled that Mencap should pay its workers providing the round the clock care at the full national minimum wage (NMW) rates rather than simply pay an allowance. Of course, HMRC was then bound to follow-up the issue with other social care providers which would have left many of them facing huge bills for backdated NMW payments to employees and the standard 200% non-compliance penalty from HMRC.
Fortunately, HRMC has conceded that its earlier NMW guidance was not entirely clear on the subject of sleep-in hours so it has agreed to waive any penalties for failing to pay NMW rates to sleep-in workers for shifts before 26 July 2017. However, NMW arrears and related PAYE and NIC will still need to be paid for affected employees, although HMRC enforcement action concerning these payments has been temporarily suspended until at least 2 October 2017.
Sleeper cab allowances
Lorry drivers are commonly paid an overnight allowance by their employer when away from home on driving duty. As with most such expenses, employers can simply reimburse the employee’s cost based on receipts or use an approved scale rate: the haulage industry scale rate for overnight stays away from home is £34.90, or £26.20 if the employee uses a sleeper cab.
All employer dispensations were abolished from April 2016 and since then there has been a period of negotiation between HMRC and the Road Haulage Association (RHA) regarding the continued payment of industry scale rates. Since April 2017, HMRC has insisted that haulage businesses apply for an approval notice to pay up to maximum of the overnight scale rates to their drivers free of tax and NIC. Employers who do not have an approval notice are required to deduct tax and NICs from the payments via the payroll. As part of the application process, employers must certify that they carry out regular expenses checks on their drivers to ensure that they are actually incurring expenses while staying overnight in their sleeper cabs. This has created a new administrative burden for haulage businesses, as previously, it was only necessary to prove that the driver was working away on driving duties for the relevant periods.
There has been uncertainty over what evidence of incurring expenses employers must obtain from their drivers to substantiate that the payment of £26.20 per night is not excessive. HMRC has now provided some guidance on the evidence that is needed and the wording suggests that:
- Period checks need only be on a quarterly basis
- Receipts or other evidence of expenses incurred (including time and date stamped personal photos of meals when receipts are not available) should be kept until the period check is carried out
- It is not necessary for employees to prove that they incurred at least £26.20 per night
- Costs for items such as maintenance / cleaning of the cab and bedding are relevant.
While the RHA continues to push for a much simpler self-certification system, it is clear that employers in all industries should maintain robust record checking systems for employee expenses.
For help and advice on employee allowances please contact Karen Foster.
Employer Essentials Index