Social care funding continues to be a topic of intense debate
It is now widely acknowledged that addressing the challenges facing the NHS requires a collaborative approach with social care. Together, spending on the NHS and social care accounts for nearly one-fifth of the UK government’s budget, highlighting the critical importance of finding sustainable solutions.
The role of private providers and funding pressures
A significant portion of social care is delivered by private companies, making funding and fees a central concern. With local budgets under pressure, proposed fee increases are often limited to low single-digit percentages.
However, these increases fall short of addressing the rising costs faced by care providers. For instance, the chancellor’s recent budget introduced substantial cost increases, including a 6.7% rise in the minimum wage and a 20% increase in employer’s National Insurance contributions. Combined, these changes result in an 8.7% increase in employment costs. This figure does not include other rising expenses such as rent, energy, insurance, training, and food.
The reality is stark: local authority funding increases are unlikely to keep pace with actual cost increases, leaving care providers in a challenging position.
Potential consequences for care providers
Without adequate funding, care providers may face several difficult choices:
- Closures: Some providers may not survive, leading to closures that could increase pressure on the NHS.
- Reduced staffing ratios: To cut costs, some providers might lower staffing ratios, potentially compromising the quality of care.
- Higher fees for private clients: Fees for privately paying clients are likely to rise significantly.
- Limited investment: Providers may have less capacity to invest in critical areas such as staff training, technology, and infrastructure improvements.
The importance of staffing in quality care
Delivering high-quality care relies heavily on staffing, with most providers allocating 60–70% of their operating budgets to wages. Care workers, often paid close to minimum wage, will see their hourly pay increase from £11.44 to £12.21 (6.7%) by April 2025.
The role of agencies in a flexible-workforce model
While many care providers strive to minimise reliance on agency staff, the dynamic nature of the sector often necessitates a flexible staffing model. Agencies help meet changing resident needs and provide access to a temporary or contingent workforce.
How agency costs are typically structured and illustrates how these costs will rise over the coming years:
| Cost breakdown | To 31 March 2024 | From 1 April 2024 | From 1 April 2025 |
|---|---|---|---|
| Minimum wage | £10.42 | £11.44 | £12.21 |
| Holiday pay | £1.26 | £1.38 | £1.47 |
| Employer NI | £0.93 | £1.03 | £1.37 |
| Apprenticeship levy | £0.06 | £0.06 | £0.07 |
| Pension contribution | £0.18 | £0.19 | £0.21 |
| Total cost | £12.85 | £14.10 | £15.33 |
These figures reflect only the direct costs of employing a worker, whether an agency worker or a permanent staff member. Agency workers often command slightly higher wages to account for the lack of job certainty.
Additional costs and profit margins
Beyond direct employment costs, providers incur additional expenses for recruitment, training, payroll, uniforms, supervision, and appraisals. These costs typically range from 10% to 40% of total expenses, with a median of around 20%. Agencies charging less than £17.50 per hour from April 2025 may be cutting corners, potentially compromising safety, compliance, or quality.
For providers seeking assurance and transparency in staffing costs, platforms like Florence can offer valuable insights and support.
About the author
Dan Blake is the Chief Customer Officer and Co-Founder of Florence. With deep experience in social care and a passion for tackling systemic challenges, Dan co-founded Florence to solve one of healthcare’s biggest issues: rota gaps that disrupt care delivery. His inspiration came while volunteering at a care home, where he witnessed an administrator spending countless hours manually inputting timesheets—highlighting the inefficiency of outdated staffing systems.
Prior to Florence, Dan’s career spanned diverse roles, including serving as an army officer and working in financial services, experiences that honed his leadership and problem-solving skills. At Florence, Dan channels his boundless energy into building a platform that empowers health and care providers and professionals.
Beyond his work, Dan is a proud father of three energetic sons and credits his wife, Emma, for her unwavering support as he balances family life with his mission to transform health and care workforce management.