Calculating the costs of homecare is an important event in my calendar at UKHCA. When Government announces new National Minimum Wage and National Living Wage rates, we get to work on spreadsheets and infographics to work out what this means for providers.
It is encouraging that our calculation is referenced more and more by local government and providers as the standard for measuring sustainable fee levels. It acts as a benchmark and its primary aim is to ensure that local government and NHS commissioners understand the minimum hourly rate that providers need to sustain their business.
From April 2020, we have established that the Minimum Price for Homecare is £20.69 per hour. This rate should not be confused with a ‘fair price’ for homecare – our calculations show only what it costs to pay staff and run the business whilst keeping it financially stable; the calculation does not include paying care workers above the National Living Wage, or include costs for rewarding the workforce. A ‘fair price’ would give providers enough money to help them retain their staff and recognise their essential contribution to society.
Our Minimum Price on the other hand, covers the minimum legally compliant pay rate for care workers (excluding enhancements for unsocial working hours), their travel time, mileage and wage-related on-costs. It also takes into account the minimum contribution towards the costs of running a business at a financially sustainable level, which must include the ability to make a profit.
Authorities and NHS commissioners who are perhaps looking for a way to pay less than the minimum price regularly say that costs of care in their area are influenced by local conditions. And yes, this is often true. But local conditions are far more likely to mean that the cost of care is higher in that area than our Minimum Price suggests. Our price is based on the legal minimum pay rate, and only being able to offer this rate to staff usually means that providers are unable to recruit or retain care workers from the local labour market.
The breakdown of the costs included in the £20.69 hourly rate is shown in figure 1. The assumptions which inform our calculations are regularly reviewed and each is backed up by published data and expert knowledge from providers.
This year, the National Living Wage will increase by 6.2%. This has had a big impact on our calculations, which have also seen a 1.3% increase in the costs of running a service – including regulation of provider organisations and/or the workforce in each UK nation.
Commissioners regularly underestimate providers’ business costs, such as employing managers or supervisors, the actual cost of recruitment, fees that must be paid to regulators and other essential transactions. And while authorities are (rightly) intent on providers offering safe care that supports people’s wellbeing, some are paying so little that, once the wage bill has been covered, there is not enough left to cover the running of the business. This is a dangerous approach. How can providers ensure a quality and safe service in these cases, let alone retain a stable and happy workforce?
I’d like to be able to say that all councils are taking on board the increases in National Living Wage and are offering providers an increase in fees to cover the costs, but this simply isn’t the case. We are hearing from up and down the country that there are councils offering insufficient, if not zero, increases to their fees. Some have offered an additional 51p to cover the increase in National Living Wage, but this doesn’t allow for other increased on-costs and providers will be left worse-off than last year. Our calculations suggest that an additional 94p per hour is needed as a minimum increase, just to allow providers to maintain their current financial position.
It’s essential that councils understand and pay the costs of homecare. The state-funded market is already in a fragile state, and further pressures will only add to the ultimate possibility of wide-scale destabilisation.