£1bn shortfall in home care fees required to cover minimum wage, finds provider body's research

There is a £1bn shortfall in home care fees paid and the amount required by providers in England to pay staff the statutory minimum wage, meet other costs and make a "small" profit.

That was among the findings of the Homecare Association's latest report on how the fees paid by commissioners across the UK measured up against its assessment of the minimum price for home care for 2024-25. The study was based on contract data supplied by the association's members.

On average, councils and health and social care trusts in Northern Ireland paid providers £23.26 per hour for care in their regular contracts for services, up 7.5% on the year before.

However, in all parts of the UK, average fees were well short of the association's calculation of the minimum price, which just 1% of contracts complied with.

The association's price is based on providers paying staff the relevant minimum wage for the country, including for travel time, meeting other worker and business costs, such as mileage, management and administration, and turning a 5% profit or surplus.

Fee rises lagging behind national living wage increase

In England, employers are required to pay staff aged 21 and over the national living wage (NLW), which rose by 9.8%, from £10.42 to £11.44 an hour, in April this year.

With many home care workers in England earning just above the NLW and direct staff costs making up about 70% of the overall price of home care, this was reflected in a 9.9% rise in the minimum price for the country, from £25.95 to £28.53 per hour.

However, the Homecare Association found that average council fees had only risen by 7.4% over the past year.

£1bn shortfall

When contracts with the NHS were also taken into account, the association identified a £1.08bn shortfall in the amount commissioners paid providers and the funding required to deliver the minimum price.

"It's shocking that 99% of contracts fail to meet even the minimum price required for sustainable, quality care," said the association's chief executive, Jane Towson.

"Without urgent government action to increase funding and mandate fair fee rates, we risk destabilising the home care sector, compromising care quality, and exacerbating the already critical workforce shortage."

Labour's plan for fair pay agreement

The findings come with the new Labour government committed to legislating to create a fair pay agreement for care staff in England, in order to raise pay, terms and conditions.

However, it is yet to allocate any resource to this, despite such an agreement requiring significant increases in commissioners' payments to providers.

The Homecare Association also reiterated its longstanding position that commissioning practices needed to shift from being based around time and task to being founded on outcomes for the person receiving care. It also said councils needed to manage their provider market to ensure there wasn't too few or too many providers.