So you want to buy a care home.…..what staffing issues should you take into account when deciding to go ahead, including negotiating the sale terms and purchase price? As lawyers there are red flag issues we come across on care home transactions where early consideration will save you time, money and the stress of dealing with employment liabilities and claims later on down the line.
There are recent changes to employment and immigration law coming into effect during 2024 for you to take into account identified in this article.
Here are our top four questions to identify red flag issues:
1. How do you calculate holiday pay?
The legislation and case law on holiday pay is complicated and regularly changes, making it difficult for care home owners to keep up and underpayment of holiday pay is commonplace. Care homes often make variable payments, including overtime, to workers and frequently this has not been factored into holiday pay calculations. In addition, there can be zero hours workers or bank workers where the amount of holiday entitlement has been mis-calculated at less than the correct total.
There is new legislation coming into force permitting holiday pay to be calculated at a rate of 12.07% for irregular and part year workers. This comes into effect on 1 April 2024 and applies to a maximum of 28 days per year. Rolled up holiday pay will become lawful as a potential option for employers to use from 1 April 2024.
2. Have right to work checks been carried out correctly?
Ask this question at an early stage in the transaction, generally speaking these checks should have been carried out on all staff. You will particularly want to know if non-UK nationals have the correct permission to work in the UK and does this need an extension at a later date. There are significant fines and penalties if this is not done. Although, you should carry out your own checks upon purchase of the care home.
The Home Office has published a new code of practice for employers to follow when carrying out right to work checks that will apply from 13 February 2024. It has also announced fines for failing to carry out appropriate checks are tripling from early 2024 to a maximum of £60,000 per employee.
3. On an asset purchase, are you complying with TUPE Regulations?
If you are buying a care home via an asset purchase, rather than a company share purchase, it is likely that the Transfer of Undertakings (Protection of Employment) Regulations 2006 (referred to as TUPE or the TUPE Regulations) will apply. The Seller will have to comply with obligations to inform and consult with the staff, factoring this into the timetable of the transaction. If the Seller fails to do this properly, then you as the Purchaser can also end up having liability for this and employees can bring claims of up to 13 weeks’ pay each.
For smaller TUPE transfers occurring from 1 July 2024, employers may inform consult directly with employees rather than there being elected employee representatives in place. This applies where there are no representatives in place already where:
- There are less then 50 employees irrespective of the size of the transfer; or
- The transfer involves less than 10 employees irrespective of the size of the employer.
4. Have you paid the national minimum wage?
Workers should be paid at least the National Minimum Wage (NMW) for hours worked. The rates change annually and vary depending on age and for apprentices. Non-compliance can occur in a care home and it is important to ensure that staff with sleep-in shift rates are paid correctly for their working time. Non-payment of the NMW can lead to fines, penalties and naming and shaming on a government website.
Rates will increase on 1 April 2024 with the top rate National Living Wage applying to workers aged 21 and over at a rate of £11.44 per hour.
This article was originally written for and published by buyacarehome.com