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What price care?
NMW, LW and a fair price for care

Martin Hopkins looks at the current situation around the National Minimum Wage, the Living Wage and sustainable funding of social care.

The National Minimum Wage (NMW) and the Living Wage (LW) have drawn headlines for some years now. The NMW was introduced in 1999 and the LW campaign can trace its history back to 2001. However, recent negative publicity has brought both of these rates into sharp focus within the care industry.

The question being posed by many is whether the NMW, LW and a fair price for care can exist together and if so, how? In addition, many are querying whether rates paid to care providers are sufficient to allow them to provide the level of care required at the rates demanded by either the NMW or LW. At the same time as these questions are being posed, employers in the care industry are preparing themselves for proposed reform to the legislation governing zero hours contracts and are considering the implications of that proposed reform.

National Minimum Wage

Before proceeding into the detail it is worth reminding ourselves of the relevant rates for the NMW and the Living Wage; shown below are adult rates:

Current rates      2013/14 2014/2015
NMW      £6.31 £6.50
Living Wage      £7.65 (£8.80 London rate) To be announced on 3/11/14

In terms of the NMW, the implications of not paying should, in my opinion, be well-known to all employers, but particularly those operating in the care industry. After 15 years I find that nearly all the employers I deal with are aware of the NMW and are paying it. There is a very small percentage who are not, through ignorance of the existence of the NMW. A slightly higher percentage are failing to pay at the correct rate because they do not have a proper understanding of which payments and which hours can be taken into account when calculating the NMW. The intricacies of those calculations are too detailed for me to consider in this article but the risks for employers should be clear. The Government is now naming and shaming employers who they find have failed to pay the NMW. There are also significant financial penalties in terms of back pay and fines for such employers.  Finally, and arguably most importantly, providers risk their reputation and future contracts by being found to be in breach.

Living Wage

The implications of not paying the LW are less, as there is no statutory force behind the rate. However it is worth visiting the LW website (livingwage.org.uk) to consider the history of the Foundation, the high level support it receives and details of the Social Care Campaign it supports. This campaign has been launched by Citizens UK, which originally created the Living Wage Foundation (icareaboutcare.org.uk) and sets out four main aims: Dignity in Work, Enough Time, Better Relationships and Proper Training. Whilst there are elements in the Enough Time aim that relate to this article (homecare workers to be paid for travelling time between visits and care homes to be sufficiently staffed), it is the first of the aims which has most relevance to our context. The campaign calls for care workers to be paid the LW, and to be offered access to an occupational sick pay scheme and a clear pathway for career progression. Laudable aims, but how are they to be funded?

The campaign cites the example of Islington Council, which introduced contracts in June 2014 with its homecare contractors under which the 800 care workers who provide care in the borough are paid the LW. At the same time, Islington is to pay increased Personal Budgets in order that individuals are able to pay their care staff the LW.

As set out in the table opposite, the LW for the coming 12 months will be announced on 3rd November 2014, during Living Wage Week. Expect to see increased coverage of the LW and the Social Care campaign around that time.

Sustainable funding of social care

It is clear that there is a groundswell of support for the LW and that the publicity around the NMW is changing some attitudes. However, a negative view of the level of pay within the care industry is supported by reports released at the end of last year. The Guardian reported on 25th November 2013 that Her Majesty’s Revenue and Customs (HMRC) had identified £338,835 in back-pay owed to 2,443 workers in the care sector through failure to pay the NMW. This followed a two-year investigation of the sector by HMRC. Worryingly, of the 183 investigations completed, 48 per cent of employers had paid workers less than the NMW. The reasons for this are clear, according to Katie Hall, Chair of the Local Government Association’s Community Wellbeing Board, who told the Guardian in October 2013, ‘Until something is done to put council finance on a sustainable footing social care will remain significantly underfunded and services will suffer as a result. The bottom line is that the standard of care will not be substantially lifted until more money is put into the system.’

Continued debate

Whichever view you support, what is clear is that there will continue to be significant debate over the care sector and the levels of pay within it. What is also very clear is that employers in all sectors must pay the NMW. The implications of not doing so are serious and can be very costly.

For balance, I thought I should consider another industry and how it is doing with levels of pay. Being a lawyer, I immediately thought of the legal sector. I was pleased to see reported in the Law Society Gazette last week that the number of legal employers signed up to the LW had increased by 50 per cent in one year. I was less pleased to note that this significant increase only results in a total of 33 law firms, barristers’ chambers and related organisations being signed up. To put that into context, there were 10,726 practising law firms in England and Wales in September 2013.

So next time you are challenged about levels of pay in the care sector you might like to refer to what lawyers are doing to provide you with some context.

Martin Hopkins is a Partner at Birkett Long LLP.
Email: martin.hopkins@birkettlong.co.uk

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