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The Homecare Deficit

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19 January 2016

During 2014 Hazlewoods and the United Kingdom Home Care Association (UKHCA) each carried out Freedom of Information requests to assess the lowest and average hourly rates paid by Local Authorities for elderly homecare services.

This data was widely reported in the Autumn of 2014 in Hazlewoods, “Health and Care Focus”, and the UKHCA’s report into the funding of older people’s care.

Hazlewoods have made new requests to Local Authorities to establish the rate being paid for 2015/16 and the findings make for an interesting read. The increase over the prior year is significantly less than the cost increases experienced by agencies.

This analysis relates solely to older people’s care but we also hold data in relation to the care of young adults (under the age of 65) and foster care, both of which we will report on separately.

The weighted average price for an hour of homecare in England for 2015/16 is £13.67, an increase of just 0.7% over the rates reported by the same authorities in 2014/15.

During the last year we have seen:

  • The commencement of pension auto-enrolment for many agencies increasing wage costs.
  • The increase in the main rate of National Minimum Wage (NMW) from £6.31 pre October 2014 to today’s rate of £6.70, an increase of 6.5%. This is before the planned increase to £7.20 in April 2016 for workers aged 25 and older (a further 7.5% increase).
  • Whilst the Consumer Prices Index was static in the year to August 2015 this was largely held at nil due to the reduction in food prices (2.8%) and motor fuels (12.9%). Given most operators have not reduced mileage payments to their employees, the full impact on social care costs has almost certainly been an upward trend in this period.
  • An ever increasing number of employment appeal tribunal decisions generally in favour of employees on travel time, holiday pay, minimum wage calculations and sleep-ins.
  • Insurance costs rise dramatically with some insurers exiting the market.
  • Increased recruitment, retention and training costs as demand for good quality care staff increases nationwide.

Our research highlighted four authorities paying £11.00 or less per hour and 11 paying less than £11.50 per hour. UKHCA calculate that the cost of wages for one hour alone to be £11.01 before the National Minimum Wage increase in October 2015 and pension auto-enrolment.

In the Summer Budget of July 2015, George Osborne proposed that the National Living Wage would replace the £6.50 minimum wage, rising to £9 an hour by 2020. This does not take into account any increase in wages for staff currently earning more than this rate. If a 38% increase were applied to the £11.01 average wage cost, calculated by UKHCA this equates to a rate of £15.25 per hour.

Of the authorities that responded, only 18 currently pay more than £15.25 per hour and none of these pay enough to cover overheads let alone produce a profit.

We suggest that providers should:

  • Review their position to assess their costs and compare this to the data above, evaluating what differences arise.
  • Put forward their views to authorities now in readiness for the next financial year.
  • Ensure that well thought through evidence is presented to authorities in advance of April 2016 to justify a need for fee increases.
  • Engage in discussions with authorities to ensure increases in costs are adequately funded and that changes in employment legislation/interpretation can be funded.
  • Consider your costs and business structure to ensure it is in good shape.
  • Investigate, if not already doing so, what guidance your local care providers association and UKHCA can provide in your discussions with local authorities.
If you would like to discuss any of the above or consider the individual responses from authorities please contact Andrew Brookes, Head of Healthcare, on 01242 237661. We would be delighted to help you with your costs and business structure.


Andrew Brookes - Partner and Head of Healthcare
Andrew Brookes
Partner and Head of Healthcare Contact details