Smith v Oxfordshire Learning Disability NHS Trust EAT/0176/09

national minimum wage | sleep-in payment | allowances

The Employment Appeal Tribunal (EAT) has held that a sleep-in payment was not an allowance for the purpose of the national minimum wage. Therefore it should not be excluded from the calculation of the hourly rate paid by the employer.

Mr Smith was employed by Oxfordshire Learning Disability NHS Trust in a residential home. He worked 15 hours per week, for which he was paid a salary equivalent to an hourly rate that exceeded the national minimum wage. Under his contract of employment, he was at times required to sleep in at the home. He was paid a sleep-in payment equivalent to £2.70 per hour. Mr Smith resigned and brought a claim in relation to, among other matters, the national minimum wage. The employment tribunal dismissed his claim. He appealed.

The question for the EAT was how the salary and the sleep-in payment should be taken into account for the purpose of calculating whether or not the Trust had paid the national minimum wage. Under reg.14 of the National Minimum Wage Regulations 1999 (SI 1999/584), the hourly rate paid during a pay reference period is determined by dividing the total payments made (in accordance with reg.30) in the pay reference period minus any reductions under regs.31-37, by the number of hours worked in the pay reference period. In most cases the pay reference period is one month. It was agreed by both parties that the sleep-in hours should be taken into account in calculating the number of hours worked during a month. However, the Trust maintained that the sleep-in payment should be included in the calculation of the sums paid, whereas Mr Smith argued that it should be excluded. Under the Trust’s method, the average hourly rate did not go below the national minimum wage, whereas if the payment was excluded the average hourly rate fell below the minimum rate.

Under reg.31(1)(d) of the Regulations, reductions to be subtracted from the payments made include "an allowance other than an allowance attributable to the performance of the worker in carrying out his work". "Allowance" is defined in reg.2(1) as "any payment paid by the employer to a worker attributable to a particular aspect of his working arrangements or to his working or personal circumstances that is not consolidated into his standard pay". Mr Smith argued that the sleep-in payment was an allowance under reg.31(1)(d). The EAT had to consider whether or not the payment was an allowance under the Regulations and, if it was, whether or not it was "attributable to the performance of the worker in carrying out his work". The EAT held that the key phrase (in reg.2(1))  in deciding whether or not a payment was an allowance was "a particular aspect", which indicates an intended distinction between an allowance for doing the basic job, and an allowance attributable to some other element over and above, or distinct from, the basic job. The EAT referred to Aviation & Airport Services Ltd v Bellfield [2001] All ER (D) 164 (Mar) EAT, in which the EAT approved the government guidance on the Regulations at the time, which described allowances as "special allowances over and above standard pay ... [for] performing special duties over and above a worker’s normal duties". Taking this approach, the sleep-in payment was not an allowance. Instead it was the only payment for performing the sleeping-in duty and separate from other enhancements that Mr Smith received. This conclusion was also supported by Burrow Down Support Services Ltd v Rossiter EAT/0592/07. Therefore the appeal was dismissed.

However, in case it was wrong in its decision, and the payment was an allowance, the EAT also considered whether or not the payment was "attributable to the performance of the worker in carrying out his work" (in which case it would be excepted from the rule on allowances). Mr Smith maintained that this meant an allowance for good performance, whereas the Trust argued that it meant an allowance for actual tasks done. The EAT referred again to Bellfield in which the EAT held that a weekly allowance payable to employees subject to full attendance in a given week was not "attributable to the performance of the worker in carrying out his work". The EAT in this case pointed out that the wording in the regulations was not "performance of the work" but "performance of the worker", which suggested the quality of the work. Therefore if the sleep-in payment was an allowance it would not fall within the exception to the meaning of allowances, and would not need to be taken into account in calculating the wage paid.

Case transcript of Smith v Oxfordshire Learning Disability NHS Trust (Microsoft Word Format, 94.5K) (on the EAT website)

Go to XpertHR case law stop press.