We share some of the employment challenges faced by our clients in the social care sector, in the wake of the BBC Panorama report this week that scores of care companies are withdrawing from their contracts with local authorities and 69 care providers have closed in the past three months.
As widely reported, the precarious state of the social care sector has knock-on effects for the NHS, with high numbers of hospital patients “bed-blocking” as they await the availability of a home care package. The demographics of the UK population meanwhile are set to escalate the demand for social care services for decades to come. According to the ONS, the percentage of the UK population aged 65 and over is predicted to increase to nearly 25% by 2045, and the Centre for Workforce Intelligence estimates that at least two million more carers will be needed by 2025 in England alone to cope with growing demand.
Trends in minimum wage compliance and employment costs
The primary concern among care providers is that increasingly the funding provision for adult social care is failing to meet the growing employment costs which they necessarily incur. This is in the context of the National Living Wage rate increasing next month from £7.20 to £7.50 per hour and on target to increase to around £9.00 per hour by 2020.
Focussed enforcement action by HMRC, together with various union and media-led campaigns, are at the same time not only reinforcing principles of due compliance with minimum wage legislation, but also developing the boundaries of what can properly be classified as working hours for these purposes.
For example, it is now firmly established that the time spent by a carer travelling between their home visits counts as working time. This presents a particular cost burden for the employer in rural areas, where the locations of home visits may be spread out, which may not be reflected in the contractual rates paid by the local authority. The legal analysis of on-call and sleep-in arrangements in relation to minimum wage compliance is particularly complex and the subject of recent appeal decisions which are difficult to reconcile. The absence of sector-specific HMRC guidance does not help care providers in this respect. An example of the boundaries of minimum wage compliance being developed is the growing pressure for pre-employment training to be classified as working time and so attract entitlement to payment at minimum wage levels.
On top of salary costs, the 1% minimum employer pension contribution under auto-enrolment will increase to 3% by April 2019, and larger care companies (with payroll costs over £3 million) from this April will also bear the cost of the apprenticeship levy charged at 0.5% of their paybill.
The 64 million dollar question – or maybe that should be the £2 billion question – is how far the additional Government spending for social care announced in this month’s Budget will go to address these growing employment costs for care providers, and also towards meeting increasing demands for social care services which flow from an ageing population.
Recruitment and the Brexit impact
Related to the issues of pay and minimum wage compliance are the challenges which care providers are facing with recruitment and retention. There is already a reported shortage of qualified carers nationwide, and in some regions there are particularly acute difficulties in recruitment, and hence the pressure on care providers to keep their pay-rates competitive both with local competitors in this sector but also with other local employers.
A final issue of serious concern here is the impact which Brexit will have on the social care sector, which is even more dependent on EU nationals than the NHS. EU migrants comprise 7% of the social care workforce across the UK, the figure in the South-East being 10% and in London 12%. The sector’s dependency on EU nationals has increased by over 40% in a period of two years, based on Government figures released last month. Care providers are particularly vulnerable to the risk of an exodus of their European employees in the run-up to the UK’s exit from the European union, and are at the forefront of those calling for guaranteed residency rights for EU migrants currently working in the UK and contingency plans to ensure that there can be a continuing inflow of EU nationals post-Brexit to meet the staffing needs of the care sector.