A new report highlights how care workers are losing out because of the confusing and unhelpful way in which their working arrangements and low pay interact with tax, welfare and minimum wage rules.
For example, many care workers are unable to benefit from tax relief on their unreimbursed travel expenses because they earn too little or find the reclaim process too difficult, and cannot qualify for working tax credit because the number of hours they work – that they are directly paid for – are too low.
The study by the Low Incomes Tax Reform Group (LITRG) builds upon previous analysis of the care sector, which has looked at problems with how the National Minimum Wage (NMW) rules apply to it. LITRG has now taken this further by highlighting the significant challenges low-income care workers face when dealing with the tax and benefits systems, using queries they have received from workers as illustrations of the issues.
The group has put forward a number of recommendations which could help workers feel more supported in the vital work that they do.
LITRG Chair Anne Fairpo said:
“When is a minimum wage not a minimum wage? When some of your working hours don’t count for it and it fails to take account of all your unavoidable travel expenses. That is the situation that many low-paid care workers find themselves in.
“The problem arises from the fact that care workers do not have to be paid the minimum wage for the time they spend travelling between assignments or from home to visit their clients, even though the amount they are paid for client contact time is supposed to make up for the time they spend travelling between assignments and the expenses they incur in doing so.
“Issues such as non-payment of travel time and being given zero hours contracts (which facilitate the non-payment of travel time) then have confusing knock on effects for a care worker’s tax and benefits position, and can put low-paid care workers at a disadvantage in unexpected ways.
“While the tax system theoretically gives care workers tax relief on their travel costs – even home to work travel that is not allowed by the minimum wage rules - this is probably no more than 20p for every pound spent or mile claimed. If they are non-taxpayers, as many of them are, they will get no tax relief – which is often a nasty shock. Where care workers are due something back, they may well find the administration process for claiming the relief they are due very difficult.”
LITRG says that the interaction between non-payment of travel time and tax credits is equally disturbing. To be entitled to working tax credit (WTC), a carer needs to work a minimum number of hours in remunerative work – broadly 16 or 24 a week if you have a child, 30 a week if not. Where the employer does not pay care workers directly for their travel time this will not count towards their weekly remunerative hours, which may leave them insufficient to meet the minimum WTC requirement.
Anne Fairpo said:
“These factors, combined with irregular earnings under zero-hours contracts, result in care workers not only struggling to make ends meet day to day, but not knowing from one week to the next what their entitlement to WTC will be. Moving in and out of entitlement should not happen under universal credit which is replacing tax credits, but it is a much less generous and more burdensome regime in which zero-hours contracts do not sit easily.”
Among LITRG’s recommendations are that the Government should:
- Consider options for providing relief to non-taxpayers for their travel expenses (e.g. by allowing carry forward or carry back of claims in certain circumstances, or by allowing claims to National Insurance relief)
- Change minimum wage rules so that care providers must pay travel time as a separate item, or change tax credit rules to accept unpaid travel time as remunerative hours of work so that workers receive the support they need
- Do more to ensure that tax credit and universal credit claimants are aware of their right to deduct unreimbursed expenses from their income, and the limitations of Real Time Information data in this respect
- Proceed cautiously with their plans to impose strict conditionality rules for care workers on zero-hours contracts who claim universal credit
- Consider how care workers who are not currently earning above the Lower Earnings Limit might be able to cheaply access the National Insurance contributions and benefit system.
Anne Fairpo continued:
“This report paints a depressing picture for care workers but is an important contribution to the debate about remuneration and conditions in the care working sector.
“By publishing this report, we hope that care workers themselves will be able to use the information within it to better understand and manage their tax and benefits positions for themselves.
“Government and local authorities need to do more to ensure that care workers are supported in the vital work that they do – a small step towards this goal would be to make some of our recommended changes to the background systems they rely on and we stand by willing and ready to help in any way we can.”
The LITRG report 'Care workers – challenges of the tax and benefits system' can be found in our report section.
Some examples of queries LITRG has received are as follows:
‘I work as a carer in the community travelling to people in their own homes. i work 18 hrs per week and do not get paid mileage costs. i filled in P87 form to claim some mileage but after five mths was told i am not entitled to any mileage back as i do not pay enough tax! is this correct?’
‘I am a domiciliary care worker. I work over 30 hours per week but get paid less than thirty, more like 20 to 25 hours pw. My query isn’t about breach of National Minimum Wage regs but whether I still qualify for WTC. I have no children, am married and as far as I can see I do qualify because of the actual unpaid hours that add up each week due to travelling in between calls without payment.’