National living wage threatens care home viability

Topics covered: Ridouts professional advice

Under plans announced in the budget it has been revealed that UK employees aged 25 and over will be paid a National Living Wage of at least £7.20 per hour from April 2016, this is planned toriseto £9 per hour by 2020.

Although this is good news for most, serious concernshave been raised within the care sector about how providers will meet current obligations in terms of the minimum wage, as changes to pay could result in care homes ending in ‘catastrophic collapse.’ Five of the biggest providers have written a letter to the Chancellor expressing their concerns and highlighting that staffing accounts for 60% of the cost of care. Whilst they state they support the National Living Wage, they also say that efforts will need to be made to rescue the care system as a result of the planned National Living Wage.

It has been estimated that the cost to the care sector would be as high as £1bn by 2020.Unless extra funding is provided by councils to pay for the National Living Wage many care providers could be at risk of being driven out of their own markets.

In response to the concerns expressed, the government has announced that it will review the overall costs of providing social care to the elderly later this year to prevent the very real possibility of providers having to fail within the next couple of years.

The UK Homecare Association has suggested that an extra £750m is needed within the system to cope with the demands of the new National Living Wage.

They have gone on to make a further warning expressing how “without urgent action from government and local councils to address the deficit in funding, continued supply of state-funded home care will become unviable”.

Commenting on the issue, Martin Green, chief executive of Care England has stated “Without adequate funding to pay for the National Living Wage, the care sector is at serious risk of catastrophic collapse.” He added that providers want to “work with the government to find a fair solution that will ensure the care sector can provide a safe and comfortable environment for older people who live in care homes.”

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