Care Contracts Will be ‘Hit Hard’ by the National Living Wage Increase

The Local Government Association (LGA) estimates it could cost councils at least £330m in 2016–17 to cover increased costs for home care and residential care contracts. The 50p increase for workers will result in a considerable strain on services in the health and social care sector, as providers will struggle to meet increased costs and potentially leave the market altogether. It is expected services for the elderly and disabled will face the largest pressures, as they are already at breaking point.

Izzie Seccombe, leader of Warwickshire County Council and spokeswoman for the LGA said: “A lack of funding is already leading to providers pulling out of the publicly funded care market and shifting their attention towards people who are able to fully fund their own care. We know that care home and domiciliary care providers cannot be squeezed much further.”

Health & social care contracts

What does this mean when bidding for contracts in the health and social care market?

The UK has an ageing population and there are constant pressures on care providers to accommodate the growing number of people needing care, alongside the added stresses of limited funding, and recruiting care workers and training staff to meet the Care Certificate standards. Although the introduction of the national living wage is good news for care workers and recruitment, it will severely affect care companies and their ability to compete and survive financially.

In line with the Health and Social Care Act 2012, healthcare services in the UK have experienced a major overhaul in terms of procurement. There has been an increase in opportunities for tender writing in the primary care and community health services, as well as the introduction of a more transparent, fair and SME-friendly bidding process for contracts across the board.

Smaller home care, supported living and live in care providers have been encouraged to bid, alongside the more transparent procurement directives but this is likely to be affected in a major way. SME care companies will feel the pressures of the new national living wage as they compete against larger companies for contracts, for which they will be out-bid financially. The increased costs will almost certainly deter many firms from bidding for contracts altogether, with many companies choosing to leave the market.

Care companies determined to remain in the market and bid successfully will rely on funding from local councils and it is predicted that care homes need a 6% to 10% increase in funding from councils ‘just to stand still’. It is not an option to compromise the quality of care, so it is likely the bidding process for contracts will become even more rigorous and competitive, to ensure the right provider is selected at the right price.