Sleep-ins and the National Minimum Wage: where children's home providers get caught out

Sleep-ins are part of everyday life in most children's homes. A member of staff stays overnight, sleeps in the home, and is there if a child needs them. The minimum wage rules for sleep-ins are now fairly settled, but they still catch providers out, usually not through the main rule but through the detail around it.

This article sets out how the rules work, where the risks sit, and what I'd check in your payroll. It's about the pay side. Contracts and employment law questions are for an employment specialist.

Does sleep-in time count for the minimum wage?

Generally, no. In March 2021 the Supreme Court decided in Royal Mencap Society v Tomlinson-Blake that a sleep-in worker is only working for minimum wage purposes when they are "awake for the purposes of working". Time when they are allowed to sleep, and are only there in case they're needed, doesn't count.

That rule sits in the National Minimum Wage Regulations 2015, and the government's guidance on calculating the minimum wage follows it. But it comes with conditions, and that is where the problems start.

When does sleep-in time count after all?

There are three situations to watch.

Staff are woken to work. Any time a member of staff is awake for the purposes of working counts, even if it turns out they weren't needed. The government's guidance gives the example of a care worker woken for an emergency who then isn't required: that time still counts. In a children's home, a night with a distressed child, a missing-from-care episode or a late return can easily add an hour or two.

Staff are woken so often that they can't really sleep. The guidance says that if a worker is persistently woken, so that in practice little sleep is possible, they are likely to stop being a sleep-in worker at all. In that case the minimum wage is likely to be due for the whole shift, not just the waking time. If a particular placement means the night staff are up most nights, that is a staffing question as well as a pay one.

There's no suitable place to sleep. Time asleep is only excluded if suitable sleeping facilities are provided. If they aren't, the guidance says the minimum wage must be paid for the entire shift.

It also helps to be clear about the difference between a sleep-in and a waking night. A member of staff who is expected to be awake and working for most of the night is doing a waking night, and the minimum wage applies to every hour.

Why does a small amount of waking time matter?

Because the minimum wage test isn't applied shift by shift. HMRC takes the worker's total minimum wage pay for the pay reference period, which can never be longer than a calendar month, and divides it by the total hours that count. If the answer is below the right rate, there's an underpayment.

From 1 April 2026 the National Living Wage for workers aged 21 and over is £12.71 an hour. The rate for 18 to 20 year olds is £10.85. Many residential support worker roles are paid close to these rates, so there isn't much room.

Here's a simple illustration. Suppose a support worker aged over 21 is paid £12.75 an hour for 160 rota hours in a month, so £2,040. During her sleep-ins that month she was woken for a total of six hours, and nothing extra was paid for that time. HMRC would count 166 hours, not 160. £2,040 divided by 166 is about £12.29 an hour, which is below £12.71.

That example leaves out any sleep-in allowance, and that's deliberate. The government guidance says allowances for things like being on call or working unsocial hours don't count towards minimum wage pay unless they're consolidated into standard pay. It doesn't specifically deal with flat sleep-in payments. So don't assume a flat sleep-in payment will cover the waking hours. If your pay structure relies on it, it's worth getting a clear view from an employment or payroll specialist.

What other details catch providers out?

A few more points are worth checking.

• Salaried staff. Salaried workers are tested in the same way: their pay is set against the hours that count. HMRC's manual says time awake for the purposes of working counts, so a salary that looks comfortable on paper can fall below the rate in a busy month.
• Deductions and costs. If staff pay for things they need for work, such as required clothing, and you don't reimburse them, that reduces their pay for minimum wage purposes.
• Rate rises each April. Rates usually change every April. A pay rate that was safe in March can be below the minimum in April if pay isn't reviewed in time.
• Younger staff. Different rates apply by age, so check each worker's rate when their birthday moves them into a new band.

What happens if you get it wrong?

The consequences are worth knowing. HMRC calculates arrears using the current minimum wage rate, not the rate in force at the time, so an old underpayment is repaid at today's higher rate. HMRC can also charge a penalty of up to 200% of the arrears, capped at £20,000 per worker, which is halved if the notice is complied with within 14 days.

Employers must also keep records that show they've paid at least the minimum wage, for at least six years. For sleep-ins, that means being able to show how much time staff spent awake and working.

A practical checklist

• Record every time a member of staff is woken during a sleep-in, with start and end times and the reason
• Make sure that time reaches payroll in the same pay period, and is paid
• Check each worker's average hourly pay for the pay period against the right rate, including salaried staff
• Don't rely on a flat sleep-in payment to cover waking time without specialist advice
• Watch for staff who are regularly woken through the night, and review whether the shift should be a waking night
• Confirm every sleep-in room is a suitable place to sleep
• Review pay rates before each April increase
• Keep rotas, waking-time records and payroll reports for at least six years

Sleep-ins also affect your budget. Waking time, waking nights and rate rises all need to be in your staffing costs and your cash-flow forecast, and they matter to Ofsted too, as I covered in the piece on financial viability for a new home.

I'm a CIMA-qualified management accountant, and payroll and cost modelling are a core part of what Salis Care does. If it would help to talk through how your sleep-in costs and payroll checks are set up, I'm happy to have a short, no-obligation conversation. You can get in touch here, try the free finance diagnostic, or read the finance handbook.