The Employment Rights Bill promises stronger worker protections and better pay for care workers, which the Homecare Association supports. On its own, though, this legislation will not address poor pay and employment terms and conditions in the homecare sector. This Bill could create more problems than it solves unless there is also a change in homecare funding, commissioning, regulation and provision.
The numbers do not add up. Councils and the NHS purchase 79% of homecare services. They fix prices and often pay by the minute for contact time only. The Homecare Association calculates that providing safe, high-quality, sustainable homecare in 2025/26 will cost a minimum of £32.14 per hour. Of this, £22.71 comprises direct staff costs, including the new hourly minimum wage of £12.21, plus statutory employment on-costs. Yet the average hourly fee paid by local authorities in 2024/25 is just £23.26, with some paying only £16.50.
Zero-hour commissioning and purchase of homecare at low fee rates leads to insecure zero-hour employment at low wage rates. The Autumn Budget’s minimum wage and employment tax hikes have worsened matters, raising providers’ costs by 10%. While councils received an extra £1.2bn for adult social care, cost pressures total £2.8bn. Most local authorities’ 2025/26 fee rate increases are therefore inadequate.
The sector comprises mainly small providers, with over 85% having fewer than 50 employees. Average margins of 7.6% mask substantial variation, with many state-funded providers struggling to break even. Recent Care Provider Alliance survey findings show, without adequate funding, 57% of providers expect to hand back contracts; 73% will refuse new council-funded packages; and 22% plan to close altogether.
The combination of enhanced employment rights and insufficient funding increases risk and creates unintended consequences. Cash-strapped councils are cutting costs by delaying assessments, reducing support, squeezing fee rates and pushing people to cheaper care options. Such measures risk harm to people needing or receiving care, add burdens to families and increase pressure on NHS services.
Rising costs will tempt more councils and providers to move to off-payroll, unregulated approaches. These have no training requirements, safety oversight, quality monitoring or employment protections. As one provider explained, ‘If councils won’t pay enough to cover the new employment rights, more will push people toward direct payments and unregulated personal assistants. We will see more cash-in-hand arrangements and workers with no rights at all.’
Reform requires co-ordinated action across multiple fronts. We could look to models like Australia’s My Aged Care system. This offers centralised assessment, clear funding tiers, consumer-directed care and market-driven quality standards. Closer to home, Sheffield’s new Care and Wellbeing Service shows promise. This introduced neighbourhood-based contracts, seven-year stability and focus on outcomes.
The solution must include secure funding, with an immediate injection of £1.8bn to cover the homecare deficit, followed by a multi-year social care settlement rising to an extra £18.4bn by 2032/33. Improved commissioning with legally binding minimum fee rates, fewer providers and geographic zone-based allocation would help to enhance productivity and income security. Effective regulation requires a properly resourced inspection regime and better co-ordination between authorities. Workers need fair, secure pay, training and career advancement opportunities. We need a complete care system overhaul to ensure high-quality care, fair pay for caregivers and support for families.
To get up to speed with the Employment Rights Bill, read more from CMM here or leave a comment on this column to share your thoughts.
Dr Jane Townson OBE is Chief Executive Officer at the Homecare Association. Email: [email protected] X @homecareassn