The LGA estimate that Councils will need to find a further £330 million to fund social care to ensure providers can pay the Living Wage from an already shrinking budget. The Resolution Foundation estimate an even greater challenge. They estimate care-providers who would already have had to find £1bn to pay for increases in the minimum wage over the next five years will now face an additional bill of £1.3bn by 2020. So what will be the impact:

  • Providers will be looking to renegotiate contractual terms with local authority commissioners to ensure sufficient funding to pay eligible staff the living wage from April 16 and to cover future increases. Unless further funding is earmarked for social care this is going to lead to some pretty difficult negotiations and local authorities may find they are constrained by EU procurement rules.
  • The policy announcement didn’t seem to account for the fact that, in the social care world it is the Government who will ultimately pick up the bill. Expect some serious lobbying pushing the Government to increase investment in social care.
  • Those providers who already pay staff £7.20 or more may have a competitive advantage and will want to be picking up work from other organisations who haven’t already got a business model that helps them deliver.
  • Finance Directors will have been busy doing their sums to see how the Living Wage will play out over the coming years. We expect that for some providers this may be the final nail that means they decide to get out of the market, or certain parts of it, or to look for a merger partner to take advantage of economies of scale.
  • Age may become a driving force in recruitment, undermining the need to focus on values to recruit staff who will deliver high quality care.

We will be commenting on the New Living Wage as it unfolds. For more detail on the new policy see our briefing here.

For more information

Contact Matthew Wort.