Employment tax changes will compel all social care charities to contribute an average of £20,392 more over three years in National Insurance payments, according to a new study.
The Voluntary Organisations Disability Group (VODG) reported last week that charity providers will contribute an additional £61m due to increases in both the employee and employer National Insurance rates under the health and social care levy.
Since April, there has been a 1.25% increase in both the employee and employer National Insurance rates.
VODG’s analysis of 3,000 charity social care providers, conducted by consultancy CordisBright, estimated that the increase in employers’ contributions will equate to £20,392 per provider over three years. This will vary depending on the size of the organisation, the report reads.
It also warned that unfunded rises to the National Living Wage (NLW) would make it more difficult for social care charities to compete with other employers.
Charities Hft and Community Integrated Care warned that providers may have to hand back services if the government does not increase funding.
Workers union Unite also called for increased funding for charities and warned that social care workers could leave the profession without an increase in pay.
Most charity social care workers ‘likely to be paid minimum wage’
The news comes as research from Community Integrated Care suggested many social care workers would be paid up to 39% more if they worked in other public-funded sectors.
“This pay gap is simply unacceptable,” Dr Rhidian Hughes, chief executive of VODG, said.
The increases to the NLW will also be an issue for social care providers, VODG warned, as they estimate it will rise by 6.6% per year until 2024.
VODG's survey of 28 not-for-profit providers – which covers 32,000 employees – showed only 6% are currently paid at NLW rates, but estimated that this will rise to 54% of workers after the increases.
The report said it was “highly unlikely” that employers would be able to increase pay to a higher rate that the NLW after the rises, which would mean they “will increasingly be less and less in control of the largest single area of expenditure”.
It concluded that social care employers will face a “sustained financial challenge” to find the additional resources needed to pay the health and social care levy and the increasing costs of NLW, and urged central government to increase funding via local authorities.
Hughes said: “The health and care levy and uplifts to the NLW are both urgently needed to support the retention and recruitment of social care staff. We must, however, see a greater proportion of levy funding being made available, immediately, to support the social care workforce. All parts of the NHS and social care should be able to agree on that.”
Hft: Providers could hand back services
Commenting on the study, Kevin Moyes, chief people and organisational development officer at learning disabilities charity Hft, said some providers will become financially unviable without increased central government funding.
“There needs to be greater clarity around how local authorities will pay fees which cover the cost of the new NLW, and preferably go beyond this, to reflect the real-term cost of living and encourage more individuals to work and stay in the sector,” he said.
“Without increased sustainable funding support from central government, we will see a further increase in the recruitment and retention pressures in the sector which will ultimately lead to services being handed back to local authorities and potentially some providers no longer being viable.
“We welcome the government's commitment to increase health and social care funding via the health and social care levy.
“However, it seems somewhat counter-intuitive for charities in the sector to be required to use funding received from the local authorities and donors to pay into the levy.
“Furthermore, we think that a third of the levy will be allocated to the social care sector, but there is no clarity on whether this will be sufficient to avoid the potential issues predicted for our sector or how quickly it will come through.”
Community Integrated Care: ‘The funding has to come from central government’
Mark Adams, chief executive of social care charity Community Integrated Care, said: “As a sector we fully support pay rises for NHS employees and other public sector workers, but we strongly feel that it is unjust that these increases do not apply to the 1.6 million hard-working and committed people working in the social care sector too.
“On average, care workers, despite having comparable skills with their government funded NHS counterparts, are paid up to 39% less. Clearly this is not sustainable and only when we have parity of pay can we really begin to address the ongoing recruitment and retention issues the sector faces. This funding has to come from central government.”
Unite: Levy ‘urgently needs to be rethought’
Alan Scott, national officer for workers’ union Unite, said the levy and its effect on social care charities “urgently needs to be rethought”.
“It comes at a time when many charities, particularly those who were dependent on charity shop income or money from events, are experiencing massive financial problems as a result of the Covid lockdown,” he said.
“One charity is reportedly having to save £18m a year from its budget. Many care workers who worked providing essential care during lockdown are now leaving the care profession as a result of inadequate pay at a time of rising inflation, and as a result there is a shortage of essential workers in the care industry.”
Department of Health and Social Care: 'Additional 5.4bn being invested into adult social care over the next three years'
A government spokesperson told Civil Society News: “Our social care workforce is valued, appreciated and supported, which is why we are providing at least £500 million to develop and support the workforce.
“This is a part of the additional £5.4billion investment over the next three years, which will allow us to begin a comprehensive programme of reform for adult social care.
“Most care workers are employed by private sector providers who set their pay and terms and conditions, independent of central government.”
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