Time to take care in the care sector

What do employers need to be considering? 

Care providers need to look at their overall remuneration and reward packages. Not only to retain (and reward) their current workers but to also attract new recruits, whilst remaining compliant with their national minimum wage)/National Living (NLW/NMW) obligations.

In 2022-23, the vacancy rate in the sector was down by 7%, with an estimated 152,000 vacant posts – supported by being added to the Shortage Occupation List in February 2022, which has made it easier to recruit migrant workers from the EU following Brexit.  Government measures to exempt migrant workers from the proposed salary thresholds under the health & social care visa route should also encourage recruitment in this sector.

However, increases to NMW/NLW rates from April 2024, could make it a challenge for employers to fund the increased pay rates and maintain pay differentials to reward expertise and loyalty. In some circumstances, this could put some care providers at risk of having to reduce the number of service users provided with care due to the lack of available staff, in turn, reducing their funding received. This puts a major strain on the financials of the business, and potentially leaves many service users vulnerable and without the care they need.

What are the reward and retention issues employers face in such an environment?

In 2022-23, the average hourly pay rate for a care worker in the independent sector was £10.34 – 84p above the National Living Wage (NLW).

Considering the NLW wage increased to £10.42 in April 2023, many employers will have already incurred additional employment costs to cover this. They will also be preparing for another (almost) 10% pay increase from April 2024 to at least £11.44 per hour. However, it is not just the hourly rate that needs to be considered when ensuring NMW/NLW rates are being paid; employers also need to consider the impact on pay from common risk areas applicable to the sector such as:

• Travel time between appointments 
• Rest breaks 
• Waiting time and downtime between appointments 
• Live-in care and what counts as time worked 
• Requirements to adhere to a uniform or dress code policy 
• Shift allowances and overtime premiums 

With a turnover rate of 30.4% in the independent care sector for 2022-23, how do you retain workers and maintain pay differentials between grades?

Employers may need to look at restructuring their reward offerings and consider alternatives to help attract new recruits and retain loyal employees. Any changes will need to be practical for the business and ensure they align with the new minimum wage rate increases of around 10% across the board. Possible options include: 

• Implementing pension salary sacrifice for both employee and employer national insurance contribution (NIC) savings.
• Offering other salary sacrifice schemes, attractive to employees, such as holiday buy, gym, tech.
• Discount schemes for shopping, restaurants etc.
• Share options (for more senior roles).
• Tiers of holiday and pension contributions depend on seniority and years of service.
• Increased cover for medical benefits, life assurance etc.
• Provision of company mobile phones/iPads for work purposes.
• Hybrid working and paying the £26 per month tax/NIC home working allowance.
• Providing free food/drink at work using the tax/NIC free exemption available.

With HM Revenue & Customs (HMRC) ramping up its enforcement activity in this area, and ahead of the NLW/NMW rate increases due from April 2024, it is vital payroll processes, controls and policies are reviewed. This will help ensure you remain ahead of the game with NLW/NMW compliance. Falling foul of NLW/NMW runs the risk of financial penalties of up to 200% of any underpayment identified, should HMRC open an NMW enquiry. There may also be public naming in the media.

We have an NMW Assessor Tool that can help identify areas of NMW compliance needing attention. Please get in touch with us to get your free, no-obligation, high-level risk report that highlights any potential gaps in your compliance. We will also provide a complimentary, 30-minute follow-up call with our in-house NMW expert (ex-HMRC NMW) Jane Gilmore.

If you would like to discuss any of the issues raised in this article, please contact Jane Gilmore, Patrick Crookes or your usual Mazars contact.

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[1] The size and structure of the adult social care sector and workforce in England (skillsforcare.org.uk)