EMBARGO 00:01 Wednesday 18 December 2024
The Homecare Association releases its Minimum Price for Homecare 2025/26 warning of the decimation of homecare services
The Homecare Association has published its Minimum Price for Homecare, April 2025 to March 2026. We have calculated the minimum fee rate for purchase of homecare by local authorities and the NHS at £32.14 per hour. This rate allows for full compliance with the new National Living Wage of £12.21, the National Insurance contribution and threshold changes and the delivery of sustainable, good quality, regulated homecare services.
The minimum price has increased from last year (£28.53 per hour). This is mainly because of the 6.7% rise in the National Living Wage and substantial additional costs imposed by recent Autumn Budget measures. These include an increase in employers' National Insurance contributions from 13.8% to 15% and a significant reduction in the National Insurance threshold.
The Homecare Association emphasises that this is a minimum price, not a fair price that truly recognises the essential work of careworkers. A fee rate of £33.87 per hour is required to pay careworkers an equivalent wage to an NHS Band 3 Healthcare Assistant with 2+ years' experience (or £38.32 per hour for Outer London).
For the first time, we have calculated the impact of visit length on the Minimum Price per hour. We also show the effective cost per call duration. Shorter calls are more expensive because of a higher proportion of travel time and travel reimbursement costs per hour.
The Homecare Association warns that without additional funding for local authorities and NHS services to meet the minimum price, there could be a widespread failure of care provision. Recent research by the Homecare Association found only 1% of homecare contracts with public bodies currently pay fee rates that enable compliance with the National Living Wage and ensure financial sustainability.
Local authorities and the NHS purchasing nearly 80% of care prevents providers from increasing their prices. Many councils cannot balance their books and directors of Adult Social Services must cut budgets by £1.4 billion. The Homecare Association has calculated that there is a £1.9 billion funding deficit for homecare alone. The Nuffield Trust has estimated that the Autumn Budget measures total a £2.8 billion funding deficit for the sector in 2025-26. This funding deficit threatens the very sustainability of homecare services across the country.
Our Chief Executive, Dr Jane Townson OBE warns:
"Too many local authorities and the NHS continue to commission and purchase homecare at fee rates far below the true cost of delivering care. Unless the government steps in now with additional funding, they are risking widespread failure of care provision. The NHS depends on social care services. The Prime Minister’s pledge to reduce NHS waiting lists will fail if care and support services fail.
"Low fee rates lead directly to homecare workers receiving poor pay and terms and conditions of employment. If the government is serious about improving pay for careworkers, they need to get serious about the investment that is required by central and local government to make this happen. Most homecare providers have nowhere else to turn to pay their careworkers anymore.
"If Labour is serious about improving social care, they must act now. Exempt care providers from the employers’ national insurance changes. Provide emergency funding to cover increased employment costs. Implement a National Contract for Care services that sets sustainable minimum prices. Without these urgent steps, their grand vision of a National Care Service risks having no functioning care sector left to build upon."
We call on the government for:
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Provide an immediate cash injection of £1.8 billion for homecare to cover the increased employment costs resulting from budget decisions and previous deficits.
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Exempt care providers from changes to employer's national insurance contributions.
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Ensure a multi-year funding settlement for social care to meet future demand and cover the full cost of care (estimated £18.4 billion needed by 2032/33)
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Implement a National Contract for Care service that sets a minimum price for care services. This will ensure public sector commissioners pay the full cost of quality care.
We have also produced the Minimum Price for Homecare for Wales, Scotland and Northern Ireland.
ENDS
Notes to editors
(1) The Homecare Association is the UK's membership body for homecare providers, with over 2,200 members nationally. Its mission is to ensure homecare receives the investment it deserves, so all of us can live well at home and flourish in our communities. The Homecare Association acts as a trusted voice, taking a lead in shaping homecare, in collaboration with partners across the care sector. It also provides hands-on support and practical tools for its members. The Homecare Association's members agree to abide by the Association's Code of Practice.
(2) The care sector comprises 18,500 PAYE employers, 10,850 of those are non-residential and 7,650 are residential (Skills for Care 2024). Total market value is £35.3 billion (LaingBuisson 2024), contributing £68.1 billion to the economy.
(3) Local authorities and the NHS buy 70-80% of all care services (LaingBuisson 2024). The fee rates they pay now are too low to cover costs (Homecare Association).
- 96% of supported living
- 89% of care homes for younger adults
- 79% of homecare
- 57% of older people's care homes
(4) Employment costs, representing 70-80% of providers' total costs, will surge by at least 10% in 2025-26. This is driven by increases in employers' national insurance contributions and minimum wage requirements.
(5) Providers cannot pass on these increased costs as local authorities and NHS bodies, their primary customers, fix prices. Many councils cannot balance their books and directors of Adult Social Services must cut budgets by £1.4 billion.
(6) Key findings from a recent Care Provider Alliance survey show that without immediate government intervention:
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73% will have to refuse new care packages from local authorities or the NHS.
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57% will hand back existing contracts to local authorities or the NHS.
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77% will have to draw on reserves.
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64% will have to make staff redundant.
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92% of providers who also serve people who pay for their own care will be forced to increase rates for self-funders. Many self-funders will be unable to bear extra costs and may reduce care or rely more on family carers.
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22% are planning to close their businesses entirely.
(7) Profitability in the state-funded sector has plummeted over the past decade (LaingBuisson 2024).
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Homecare average EBITDA margins have fallen from 10.8% to a low of 5.2% in 2019, with some recovery to 7.6% in 2024
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Care homes for younger adults have seen EBITDA margins halve from 26% to 13%
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Older people's care homes serving mainly state-funded residents have seen margins fall by 50%
(8) Despite some perceptions, private equity involvement in the care sector is limited. Just 12.2% of older people's care homes; 10.1% of younger adult care homes; and 12.2% of homecare/supported living services are private equity backed.
