Many thousands of care workers will get a 6.7% pay rise next April after the government announced the 2025 increase in the national living wage (NLW).
The wage floor for UK workers aged 21 and over will increase from £11.44 to £12.21 per hour, while there will be a steeper rise in the national minimum wage for those aged 18-20, from £8.60 to £10.00 an hour, a 16.3% boost.
The increase was recommended by the Low Pay Commission (LPC), based on its remit, set by ministers, to ensure the NLW does not fall below two-thirds of median hourly earnings and that any increase takes account of expected inflation up to March 2026.
The LPC said it expected the increase to amount to a real-terms pay rise for those currently on the NLW, with the Bank of England predicting inflation to be about 2% during this period.
Thousands of care workers set to benefit
The beneficiaries will include the many thousands of care workers who currently earn on or just above the NLW.Before the last rise in the NLW, in April 2024, 18% of the then 875,000 independent sector care workers in England - about 150,000 people - earned on or just under the then wage floor of £10.42 per hour (source: Skills for Care).
Most of this group would have likely seen their pay rise to the current NLW, £11.44, in April 2024, and are likely to also benefit from the full 6.7% rise in the wage floor next year.
However, because of the need for care providers to maintain pay differentials in their workforces, the many care workers earning just above the NLW will also likely benefit from the 2025 increase.
Increased fees for councils
To cover the rise, providers will need to increase the fees they charge councils, NHS commissioners and self-funders.This year's 9.8% increase in the NLW translated into increases in the fees paid by councils of between 6% and 6.6% across different adult social care service areas in England.
Councils' ability to cover the 2025 rise will depend on the local government funding settlement they receive for 2025-26 from chancellor Rachel Reeves in tomorrow's Budget.
However, provider leaders have long warned that councils do not pay them enough to cover the NLW for their staff, given their other costs.
Claim of £1bn shortfall in home care fees
The Homecare Association has calculated that there is a £1bn shortfall in the home care fees paid by councils and the NHS in 2024-25 compared with what providers in England need to pay staff the NLW, meet other costs and make a 5% profit.In a post on X in response to the latest NLW increase, the association's chief executive, Jane Townson, said: "Most councils and [NHS integrated care boards] are not paying enough to cover this year’s [NLW] of £11.44. Some have not increased fee rates since 2023. Allowing unethical purchase of care by public bodies is scandalous."
Plan to create adult social care pay-setting body
The news comes with the government legislating to create a negotiating body to set adult social care pay and conditions in England. Its agreements, when ratified with ministers, would be binding on providers, who would need to reflect them in care workers' contracts.The measure, included in the Employment Rights Bill, is designed to raise terms and conditions in the sector and thereby boost recruitment and retention, reducing labour shortages.
However, the government has admitted that it would likely raise costs for councils because providers would not be able to absorb the impact through boosting productivity, narrowing pay differentials between workers or squeezing profits.
