Learning disability charity Mencap was one of several charities and supplies of support staff who claimed they faced paying out some £400m in backpay to workers who received a flat rate payment for an eight hour night shift spent sleeping at a client’s residence, rather than NMW pay.

In a statement, HMRC said it is currently investigating social care providers for underpayment of ‘sleep in’ shifts.

The statement said: ‘The government recognises that the cumulative financial liability of penalties and arrears of wages could pose significant challenges to the social care sector. In extreme circumstances, providers may be unable to meet their obligations to repay their workers.’

New guidance now states the government will waive the financial penalties faced by employers who are found to have underpaid their workers for sleep-in shifts. It states that the government ‘recognises that written guidance published before February 2015 was potentially misleading’.

The waiver is to apply to any arrears of pay resulting from sleep-in shifts that took place before 26 July 2017. However, HMRC makes clear that any employer underpaying their staff for these shifts in the future will be liable to pay financial penalties, in the usual way, of 200% of the arrears found.

The statement, made jointly with the Department for Business, Energy and Industrial Strategy (BEIS), says the government is still working with representatives of the social care sector to see how it might be possible to minimise any impact on provision of social care as a result of the requirement to now pay NMW rates for sleep-in shifts.

To allow this work to take place before deadlines of arrears of wages are enforced, the government will adopt a policy of temporarily suspending enforcement activity of sleep-in shifts. This suspension will apply until 2 October 2017. It will apply to HMRC investigations where there may be an underpayment in respect of sleep-in shifts, and applies to employers in the social care sector only.

Earlier this week, a meeting between leading learning disability charities and the government heard that failure to suspend HMRC enforcement activity by 15 August risked pushing some social care providers into insolvency, because of the size of NMW back-pay liabilities and penalties.

Derek Lewis, chair of Mencap, said: ‘When the NMW was introduced in 1999, BIS advised that time spent asleep by care staff in residential homes and supported living residences didn’t count as work time for the purposes of the NMW. So the payment of a flat rate “on call” allowance has been the norm across the sector ever since.

‘Following two employment tribunal decisions BEIS published definitive new guidance in October 2016 recognising that the previous guidance was wrong and the NMW should be paid for sleep-time instead.

‘The unintended consequences have been disastrous as HMRC have begun enforcement action demanding six years back pay.’

BEIS/HMRC guidance, Enforcement of the National Minimum Wage in the social care sector, is here.