A number of weeks ago the Government announced that as from April 2016 employees aged 25 and above would be entitled to receive a new Living Wage based on £7.20 per hour, rising to £9 by 2020.

The 5 largest care providers in the country have recently spoken out about the catastrophic effect that this is likely to have on the care industry.

The demand for care homes and care in the home environment is ever increasing. Providers are unable to keep up with demand. The work is demanding, requires long hours and is often low paid. Nobody can criticise the desire to see such employees sufficiently rewarded for their hard work. However, as labour costs account for around 60% of the cost of care, according to a letter sent to the Government by the providers, the care industry is likely to be one of the hardest hit.

The increase affects not just the hourly rate but has a knock on effect. Pension contributions will increase, holiday pay will increase. Bupa, Four Seasons Health Care, HC-One, Care UK and Barchester have contacted the Government to explain the effect on the industry.  They estimate that the care sector faces a £1 billion increase in employment costs by 2020 based on current proposals, according to information supplied to the BBC.  They argue that this is not sustainable and care providers will fall victim to the new regime well before 2020. They warn of an NHS crisis as the number of providers going out of business increases, and shortages of care provision arise.

The UK Homecare Association (UKHA) has already warned that care for people in their own homes is becoming unviable. Such providers have already faced the Advocate-General’s opinion in the case of Federación de Servicios Privados del sindicato Comisiones Obreras which, although not binding is usually followed by the European Court and increases costs further. The case confirmed that employees should be paid for time spent travelling to and from their first and last calls of the day as well as for time spent travelling between patients. Whilst many already did this, others didn’t. The increase in wages will cause a further squeeze on stretched resources.  Councils purchase the bulk of such services.  However, according to the UKHA the cost of providing such services equates to £16.70 per hour, based on just under 50p profit for the provider. Apparently, Councils currently pay an average of £13.66 per hour, insufficient to cover the cost of services at current rates, let alone after the increase.

The care industry provides an essential service in an ageing population. Whilst paying a living wage is commendable, it is of little use if there isn’t an industry to provide it.

The Government have indicated that they shall consider the issue of social care in the Autumn spending review.  It is hoped that additional support will be provided to the industry before casualties occur.

Get in touch

For further advice on the new Living Wage and the impact on you or your business please contact Angela Gorton

For any advice on Care Home practices please contact a member of our specialist team

Please note this information is provided by way of example and may not be complete and is certainly not intended to constitute legal advice. You should take bespoke advice for your circumstances.

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