Care Home Professionals have consistently voiced concerns over the financial impact of the National Living Wage (NLW), but little is said about the advantages it may bring to the sector as rising wages make the sector more attractive to job seekers.
Recruiting care home managers has been revealed as particular challenge for operators in the latest Care Home Pay Survey by healthcare consultancy LaingBuisson, which says that the care sector is seeing a dearth of suitable candidates to manage care facilities that face the pressure of increased red tape and seemingly ever-shifting legal framework.
However, the consultant also makes the point that salaries for care home managers have risen dramatically over the past 10 years, so wages do not appear to be the only factor.
The LaingBuisson report analysed planned pay rates for hourly paid care home staff for April 2016, as well as current pay rates at the time of the survey in October / November 2015.
The survey found that there was a 3.4% increase in the Gross Pay Index for hourly paid staff between October 2014 and October 2015. This is expected to be followed by a further increase of 4.6% in the Gross Pay Index in April 2016 when hard figures on the impact of NLW become available.
Planned pay increases for April 2016 are lower on average than the 7.5% headline increase in the statutory hourly minimum, National Minimum Wage (NMW) (from £6.70 NMW to £7.20 NLW) because of compression of pay rates just above the new £7.20 legal minimum. This average is pulled down because the very worst paid who will get the full 7.5% increase are bundled in with people on slightly higher wages – perhaps already earning above the National Living Wage.
The ‘compression’ phenomenon will mitigate the impact of the living wage on profit margins in this coming year, but there will be little leeway left for further compression to mitigate the full impact of next year’s (likely 7.5%) statutory minimum hike in April 2017. LaingBuisson predicts.
Report author William Laing explained: “The ‘compression’ phenomenon will mitigate the impact of NLW on profit margins in the coming year. But looking ahead a further year, it almost certainly means that care homes will have to absorb a higher percentage increase in hourly pay rates in April 2017.
“Having put off some of the pain in April 2016 by compressing low paid pay rates just above NLW, there will be little leeway left for further compression to mitigate the full impact of the next (likely 7.5%) hike in NLW expected in April 2017.”
Historically, care home hourly pay inflation has tracked the National Minimum Wage very closely over the last decade. In April 2016, however, the Gross Pay Index is expected for the first time to fall significantly below the statutory minimum pay index. The reason is that employers plan to compress pay rates for low paid staff just above the new living wage.
Meanwhile, despite annual salaries rising faster than inflation, the role of care home manager is one that appeals to so few people that the sector is struggling to find the right calibre of staff according to LaingBuisson.
LaingBuisson Recruitment co-founder James Rumfitt said that the residential care sector as a whole continues to struggle to find suitable managers or to take hold of any measurable quality standards, or the means by which to support and achieve these.
“The number of available managers – let alone competent ones – is falling, and at an unsustainable rate. This is despite those that do manage being paid 50% more than they were ten years ago. It isn’t really about the money,” said Mr Rumfitt.