While it is always possible that case-law may change in the future, as far as we are aware, there is no significant risk at the moment in using the daily average agreements for live-in care.

Background

The obligation to pay the National Minimum Wage/National Living Wage (NMW/NLW) is to ensure that the average hourly pay the worker receives is at or above the national minimum wage over a pay-reference period. A pay-reference period is a month or the worker’s pay period if shorter, for example, weekly if a worker is paid weekly. The national minimum wage is, therefore, calculated by dividing the total earnings earned in that pay-reference period by the number of hours worked during that period. The total number of hours worked will depend on the type of work in which the worker is engaged.

Under the NMW Regulations there are three key types of work relevant to the social care sector:

    • Time work – this is work paid for according to the amount of time the worker spends working. For example, a worker paid an hourly rate.
    • Salaried work – this is where a worker is paid a set amount to work a set number of hours per year and is paid their annual salary in equal weekly or monthly instalments.
    • Unmeasured work – this is effectively a catch-all category that includes any work that does not fall into the other categories. It will generally apply to workers who do not receive a salary or are not paid at an hourly rate or according to what they produce, but instead are being paid a set amount of money to complete a particular task, regardless of how long it takes. For a care worker, it may be being paid according to the complexity of the needs of the client or according to market rates.

Live-in care

As a reminder, “live-in care” refers to when an individual careworker lives at a client’s home with them (for example, for a week or more at a time) and supports them with their care as and when required. There may be periods of “downtime” where the live-in careworkers can do as they please and they may also be permitted to leave the property for set periods each day.

Time or salaried work arrangements

The case law is clear, at the moment, that if a carer is paid by reference to the length of time they work (i.e. an hourly rate) or they receive a salary (i.e. a monthly payment), all hours of the live-in assignment will count when calculating if the national minimum wage has been paid on average over the pay reference period. In these circumstances, providers would be expected to pay live-in carers for every hour of a live-in assignment.

Unmeasured work arrangements

The other option that live-in care providers have available to them is to pay live-in carers by way of a set flat daily or weekly rate according to factors other than time. For example, with reference to market rates for live-in care or the complexity of the client’s needs, and treat the arrangement as unmeasured work.

Providers who wish to set up their arrangements in this way will need to enter into what is referred to as a Daily Average Agreement with their carers who provide live-in care.

A Daily Average Agreement effectively specifies that although the worker may be present at the client's home for, for example, a 24-hour period, they will actually only be required to work, i.e. carry out duties, for the client for X number of hours per day. It would then only be those hours that count for the purposes of checking the NMW compliance in the live-in care arrangement.

Providers must note that to be valid, a daily average agreement must:

      • be a written agreement;
      • be between the employer and the worker;
      • be entered into before the pay reference period or periods in which the live-in care is carried out;
      • set out the average hours the worker is likely to spend working each day; and
      • contain an average hours figure that is demonstratively realistic.

The average hours figure must be a realistic estimate of how long the carer is likely to spend caring for the client during each 24-hour period. The figure is likely to be calculated when the care plan is designed for the client. The number of hours agreed must remain realistic in order to stand up to challenge from HMRC and therefore it should always be checked if the average is realistic. In light of this, we would advise that providers, therefore:

      • ask carers to record each time they carry out tasks for the client and for how long so that you assess if the average remains realistic;
      • ask carers to notify you if they are frequently spending more or less time caring for the client than is specified in the daily average agreement;
      • check with carers at carer’s appraisals and one-to-one meetings if the average remains realistic;
      • keep records of changes made to average hours in order to evidence willingness to change these where appropriate.

Comments

There is a court of appeal case (Walton v Independent Living organisation) that supports the use of daily average agreements for live-in care, although the wording of the National Minimum Wage Regulations has changed since that case was decided. We are aware, however, that even since the changes in 2015, HMRC has continued to accept arrangements where there are valid daily average agreements for live-in care, and we are not aware of any HMRC decisions where non-compliance was found in the circumstances.

While there is always a risk that HMRC could change their approach going forward, as far as we are aware, there is no significant risk at the moment in using the daily average agreements for live-in care.

For more information

We have advised a significant number of social care clients on structuring their live-in care arrangements to ensure compliance. If you require assistance with your working arrangements, please get in touch with your usual contact in our Employment Team or speak to Anna Dabek or Matthew Wort . You can find out more about our employment work on our website.

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