Care for the elderly businesses will be hard hit by living wage

Gary Jefferies

Both care providers and their elderly clients face rising costs as the triple threat of the living wage, staff shortages and court rulings hit the sector, industry experts warn.

Care home operators who rely on social care contracts face a turbulent future as funding from local authorities is scaled back and costs rise, with possible implications for thousands of elderly people in Tonbridge and Tunbridge Wells.

Those in self-funding care will not be immune either, with costs incurred from wage hikes and recent court rules being passed on to the consumer.

And it is not just care and nursing home provision which will be adversely affected by a rise in wages, said Richard Gould, Managing Director of TerraBlu Home Care.

The company, which provides local care services for those who still have the capacity to live at home, already pays more than the living wage, although general wage inflation and other developments pose challenges to the whole sector.

Mr Gould said: “The rationale behind moving on to the living wage in order to create a high wage economy is a great thing, but wage inflation will feed into prices.

“Care margins are tight, driven down over the last seven years by the collapse in local authority funding.

“Social care contract provision makes up the bulk of the market in Kent, but as their funding has collapsed so has their ability to pay appropriate fees.

“Not only have rates fallen but so has the amount of services purchased by the authority which, combined with the living wage, will have a huge impact on those providers catering for this market.”

TerraBlu took the strategic decision four years ago to cease providing services for social care contracts, as the effects of central government cuts to local authorities first started to be felt.

Although this meant the company saw its client numbers fall from around 200 to ‘just under half’, and a subsequent reduction in staff numbers from 70 to around 20, it meant the firm was able to pay a ‘significant premium’ on its wages.

Mr Gould said: “Because I wanted the best staff in West Kent you have to pay more.

“While we pay over the living wage at the moment, if everyone moves up the pay scale it will add wage pressure on us as the premium we pay will also increase.”

And even paying extra is not enough to plug gaps in the labour market.

“The main challenge in West Kent is finding staff because it is a challenging job, but ultimately it is also a very rewarding job.”

Recent court rulings stating travel between jobs must be counted as ‘work time’ and paid as such, have also had a specific impact on providers such as TerraBlu.

Effectively this means previous arrangements where expenses simply cover the cost of travel will have to be revisited as travel time will now be paid at the living wage rate.

“We have decided to address this issue head on, but alongside the rise in the minimum wage overall it will end up feeding through to higher costs for the elderly,” said Mr Gould.

Debbie Harris, whose business Chosen with Care helps those in Tunbridge Wells and Tonbridge who are self-funding find suitable accommodation also warned the industry was heading for a crisis.

“I have spoken to many providers and the general consensus is around half will be running a business no longer financially viable once the living wage is introduced.

“Care homes are already pushing up fees with this in mind.”

Wages are also being driven upwards by a shortage of staff through the industry.

“Everyone is struggling to recruit at the moment,” she added.

“I have heard of one care service provider who recently closed because it can no longer run a viable business. It does make you wonder what’s going to happen.”


The new national living wage, to be introduced on Friday [April 1], will see the pay for those aged 25 and over increase from £6.70 to £7.20 an hour, an 11 per cent rise in mandatory pay. It is then due to rise to £9 an hour by 2020.

Kent County Council (KCC) currently contributes £463 a week per person to those needing financial assistance for care, which Mrs Harris explained was below the national average of £511, putting added pressure on providers operating in Kent.

KCC is already conducting consultations on disposing of the remaining care homes still under direct local authority control.

To qualify for any financial assistance, those seeking care must have under £23,250 in capital available for partial funding and under £13,000 for full funding.

Last year there were 21,902 people aged over 65 in receipt of social care funding across Kent, which accounts for around 70 to 80 per cent of those needing care.

The remainder are classed as ‘self-funding’, meaning the entire cost is met by the user.

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