HMRC appear to be continuing to carry out inspections in which they indicate that every hour of a sleep-in counts for National Minimum Wage (NMW) purposes (where HMRC believe the workers are involved in time work).

In some cases, they are using a standard letter automatically seeking documents going back over a three year period for the entire workforce at the outset of an inspection. Our experience is, that if approached appropriately this does not actually have to be provided during the first meeting and, in some circumstances, even at all.

Notices of underpayment

Where we have challenged HMRC’s initial findings that every hour counts based on both NMW law and public policy arguments, the process appears to have stalled. In some cases, this has been for many months with no notices of underpayment being issued as yet.  We consider this may be in part because behind-the-scenes discussions in Government are taking place.


In light of HMRC’s approach, there has been an increasing move towards top-up payments, but some providers are holding their line. Where top-ups are introduced, the arrangements need to be structured carefully for the top-up payment to count as eligible pay.

Employment Appeal Tribunal (EAT) decisions

Whilst there are a number of upcoming EAT sleep-in decisions, which will be of significant interest, we are of the view that the time work argument is unlikely to succeed at EAT level because of a previous Court of Appeal decision. As a result, providers should not rest their hopes on the outcome of the forthcoming EAT cases.

Ultimately we consider the interpretation of the law on time work to be wrong, but it is likely to take a Supreme Court decision to prove it.

What counts as a sleep-in?

The lack of joined-up thinking in Government is evidenced by the fact that the new gender pay reporting regulations, published earlier this year, are absolutely clear that the time spent asleep doesn’t count as hours worked when calculating pay for gender pay reporting purposes.

We remain of the view that a sleep-in can be argued to be unmeasured work, where a worker is clearly not entitled to be paid by reference to the time they work for the sleep-in, under their contract.  HMRC is not currently openly giving any views on this but, in the past, they have published documents that make it clear they would accept a sleep-in could be classed as unmeasured work. The case law has not changed regarding unmeasured work since this document was published.

From a recent inspection we are assisting with, it appears that HMRC may still accept that a sleep-in could constitute unmeasured work and only count hours under a daily average agreement (where structured properly).

For more information

For further advice or information concerning sleep-ins or National Minimum Wage, and how they might affect your organisation, please contact Matthew Wort or Anna Dabek.