Many local authorities are commissioning and purchasing homecare at rates that prevent compliance with employment and care regulations.
The Homecare Association routinely conducts research on fee rates for homecare purchased by public bodies from independent providers across the United Kingdom. In this report, we share new data collected since April 2025, when the National Living Wage rose to £12.21 per hour.
Each year, the Homecare Association looks at the costs of homecare delivery to calculate a Minimum Price for Homecare. This is the minimum rate a homecare provider needs to deliver safe, quality services, meet employment regulations, and operate sustainably. This, in turn, helps build capacity in the sector and reduces the flow of talent to lower-skilled but better-paid jobs in retail and hospitality. Staff costs include the National Living Wage (NLW) for all work hours (including travel), and statutory employment on-costs. The latter include statutory pension; national insurance; sick pay; holiday pay; and training time. The hourly rate also includes a contribution to other running costs. These include wages for the registered manager and office staff; recruitment; training; digital systems; telephony; insurance; regulatory fees; PPE and consumables; office rent, rates and utilities; finance, legal and professional fees; general business overheads; and a small surplus for investment.
This year’s data show, once again, that local authorities are consistently failing to fundhomecare at sustainable levels.
The average fee rate increase is 5.6% against cost increases of 10-12%, giving an average fee rate of £24.10 per hour, compared to our Homecare Association Minimum Price of £32.14 per hour.
Almost one-third (27%) of local authorities are paying fee rates below £22.71, which is the amount needed to cover statutory employment costs of care workers at the minimum wage. This leaves less than nothing to cover other operating costs, which relate to meeting care regulations.
Fees which fall short of the increases in minimum wages, inflation, and the actual costs of delivering regulated care place at risk the people who rely on high-quality care to live independently at home. Shortfalls also put immense pressure on providers, careworkers, and NHS services.
Despite a £3.7 billion allocation for local authorities commissioning adult social care, most contracts fail to meet the basic cost of providing care, legal minimum wage increases, changes to employers’ National Insurance Contributions and rising inflation. In 2025–26:
- Only 1% of contracts for which we received details met the Minimum Price for Homecare, our benchmark for the legal and operational cost of safe, regulated care.
- Just two local authorities offered uplifts aligned with the 10% rise in provider costs, though neither are meeting the Minimum Price for Homecare.
- We estimate a funding gap of at least £1.6 billion in England alone.
Despite clear commitments from the Labour government to support home-based care and improve pay and conditions for care workers, the reality on the ground remains stark. Unlike other sectors in the economy, homecare providers cannot raise prices in response to increasing costs, as councils and NHS bodies buy almost 80% of services and fix prices. Of total costs, 70-75% are employment costs. Employment costs may be over 90% of total costs if fee rates are low. There is, thus, a direct relationshipbetween the fee rates received by the provider and the wages they can pay their careworkers
Without urgent intervention, the government’s ambition for a Fair Pay Agreement in social care is undeliverable. This issue demands immediate action across three fronts: adequate funding, reformed commissioning, and long-term workforce planning.
We call on the government and local authorities to:
A. Secure adequate funding
- Ring-fence social care budgets and invest at least £1.6 billion in England to meet historic funding deficits.
- Set and enforce a national contract for care with fee rates that cover direct costs and sustainable overheads.
B. Reform commissioning
- Local authorities must organise care delivery in geographical patches. Good quality ethical providers need enough hours in a zone to optimise routes and create efficient rotas. This reduces fuel costs and contributes to net zero.
- Maximising client contact time and minimising travel also improves the utilisation of care workers. This enables payment for shifts instead of per minute for contact time only. This results in higher, more secure income for care workers. Sheffield City Council has focused on quality, outcomes, and workforce value. They report reduced workforce turnover; 86% of providers rated good or outstanding by the CQC; significant reduction in safeguarding referrals; no waiting times for hospital discharge; and evidence of improved outcomes and wellbeing for care recipients.
- Working in this way enables homecare to become part of multi-disciplinary neighbourhood health teams. This allows care workers and health professionals to collaborate in addressing increasingly complex needs.
- Local authorities and NHS bodies must publish fee rates for the coming year by the end of February, so providers can plan.
C. Build for the future
- Implement a 10-year workforce plan, including:
- Pay parity with equivalent NHS roles.
- Training, career development, and supervision.
- Workforce strategy on a statutory footing.
Click below to read the full report.
