Our acceptance of low pay in social care costs us more than we think

It is widely recognised that adult social care work is low paid. Labour’s first King’s Speech promised a Fair Pay Agreement in the adult social care sector, which could set a sectoral minimum wage and potentially a progressive pay scale for care workers.

This would be welcome, the median pay for care workers is in the bottom 20th percentile of all jobs, meaning 80% of other jobs in the UK pay more. Adult social care work paid less than the equivalent roles within the NHS. For domiciliary care workers, travelling between houses isn’t usually paid, meaning they are at risk of being paid even less than the minimum wage.

But the major barrier to better paid work is clear: cost. Funding for adult social care from Local Government is under significant pressure due to deep real-terms cuts to Local Authority funding over the last decade. This doesn‘t look to change dramatically despite the new Government.

The financial strain on public funding for social care has also shifted more of the burden of paying for care onto individuals who do not meet the increasingly strict means tests, or who do but are still unable to access care due to insufficient provision. The costs vary significantly between individuals, with the Department of Health and Social Care estimating 1 in 7 people will face costs of over £100,000. Paying care workers more is often framed as either requiring individuals to shoulder more of the costs still, or accepting low wages in care to have better access to cheaper care.

However, when we talk about the cost of paying care workers more, it is often a very narrow conception of ‘costs’ which solely focuses on the additional wage costs. But there are much broader costs linked to staff pay which providers face, such as the costs of recruiting new staff if turnover is high and paying more expensive agency staff to fill vacant roles. We call these the ‘hidden costs’.

JRF is making 2 significant interventions in this space:

• We'll try to quantify these costs in an upcoming research project, so watch this space. 
• We’ll use our role as a social investor to fund providers in care markets who are giving their workers good wages and job quality.

Factors that influence recruitment and retention in adult social care

We’ve explored the literature to see what these extra costs might be, and any evidence that providers who pay lower wages face additional ‘hidden costs’ compared to those who pay higher wages.

Recruiting and maintaining a well suited and motivated workforce is key for any business, and the factors that influence this for adult social care are well understood. Paying at or above the Real Living Wage is important for both recruiting and retaining staff. The type of contracts staff are on also matter, with staff on zero hours contracts or with fewer guaranteed hours found to be more likely to leave their jobs. An organisational culture which values and celebrates staff achievements is also shown to be important for retention, as well as a having a good reputation as an employer helping to attract good staff. Conversely, staff who have higher workloads are more likely to leave their roles.

There is mixed evidence on the importance of learning and development on staff retention, with some finding regular training and a good learning and development offer are important for retaining staff while others find it may actually make staff more likely to leave. This may be reflecting that as staff acquire more skills they look elsewhere for better pay, either within adult social care or to the NHS. Research also suggests staff who are younger and less experienced are more likely to leave their roles, as well as those who have a new manager.

The costs we don’t see

The challenge of recruiting and maintaining a care workforce is placing financial pressure on providers. Skills for Care estimate the cost of recruiting a care worker can be up to £3,600 per worker, which includes staff cover during the time to rehire, advertising, hiring for the new role, training and the lost productivity of the new worker relative to the skills of the experienced staff member lost. The Care England Pulse Check found 43% of providers reported struggling with the ongoing costs of recruitment, though much less than the 87% struggling with paying the National Living Wage or Real Living Wage. A study commissioned by care providers on financial viability found providers were redirecting resources into ongoing recruitment which could have otherwise been spent on staff training, and managers were having to work shifts to provide cover, rather than focusing on their managerial responsibilities. 

There are also direct costs of struggling to fill vacancies. Many use agency staff to cover necessary shifts, which are estimated to cost up to 80% more than permanent staff. Over half of providers in the Care England study (54%) reported increased use of agency staff in 2023 due to staff shortages. Similarly, half of providers surveyed in the Pulse Check (49%) sited paying agency staff as a cost pressure.

Low wages may also result in greater absenteeism and sick days among staff. The Living Wage Foundation study found some providers reported staff taking fewer days off work following implementing the Real Living Wage, with one provider explaining it wasn’t always that people were sick, but their cars were when wages were too low.

Despite need for care far outstripping current provision, care providers are losing business due to ongoing staff shortages. A Care England study found in 2023 44% of providers it surveyed had turned down new admissions and 18% had to close services altogether due to ongoing staff shortages. The Care Quality Commission in their annual survey found a quarter (26%) of providers reported unused capacity due to staff shortages.

A framework for uncovering the ‘hidden costs’ of low wages

To capture the ‘hidden costs’ of low pay, we developed the following framework which groups costs, other than wages, into 2 buckets:

Financial costs

• cost of recruitment (advertising roles, managers time for interviews, and so on)
• training of new staff
• paying agency staff to cover vacancies
• handing back of contracts due to staff shortages
• closing services due to staff shortages.

Lost working days

• time taken to hire new staff following staff resigning
• number of permanent vacancies
• time to full caseload for new hires
• sick days.

JRF are commissioning research which aims to quantify these ‘hidden costs’ associated with paying care workers, and how they differ between providers who pay higher wages (at or above the Real Living Wage) compared to those who pay lower wages (at or close to the National Living Wage). Our aim is to show a fuller picture of the costs surrounding pay decisions, to understand the reasons for, and financial decisions about, a new settlement on pay for care workers.