Why Labour's Employment Rights Bill Won't Improve Employment Conditions in Homecare

Labour's new Employment Rights Bill promises stronger worker protections and better pay for care workers. The Homecare Association supports these aims. On its own, though, this legislation will not address poor pay and terms and conditions of employment in the homecare sector. Indeed, this bill could create more problems than it solves unless there is also a change in homecare funding, commissioning, regulation, and provision.

The numbers don't add up

Councils and the NHS purchase 79% of homecare services. They fix prices and most pay for contact time only. Our Homecare Association calculations show providing safe, quality, sustainable homecare in 2025/26 will cost a minimum of £32.14 per hour[i]. Of this, £22.71 per hour comprises direct staff costs. These include wages at the new minimum wage of £12.21 per hour, plus statutory pension; national insurance; holiday and sick pay; average mileage and travel time; and training time. Yet the average fee for homecare paid by local authorities in 2024/25 is just £23.26 per hour[ii]. Only 1% of contracts cover actual delivery costs. Many councils exacerbate this by auctioning care to the lowest bidder, regardless of quality. Some councils pay as little as £16.50 per hour.

Zero-hour commissioning and purchase of homecare at low fee rates leads to insecure zero-hour employment at low wage rates.

Some local authorities compound the problems by allowing too many providers on their frameworks. Care workers end up with too few hours each and inefficient rotas, travelling long distances between visits with multiple gaps. Insecure, inadequate hours and income, coupled with a high proportion of under-paid travel time, causes care workers to leave. Smarter scheduling and zoning can optimise use of care worker’s time by 35% and cut travel by 65%[iii]. Fragmentation, however, prevents economies of scale, efficiency of operation, and security of income.

This approach to commissioning and purchase of homecare leaves homecare providers with no guarantee of work or income. This means it is hard for them to guarantee hours of employment and meet the full-time salary requirements of sponsorship licences.

To make matters worse, the Autumn Budget's minimum wage and employment tax hikes raised providers’ costs by 10 percent. Councils received an extra £1.2 billion for adult social care in the Local Government Settlement whilst facing cost pressures of £2.5 billion. This means the fee rate increases offered by most local authorities for 2025/26 are inadequate to cover the 10% increase in costs. Some are offering no uplift at all.

Over 85% of homecare providers are small and medium enterprises with fewer than 50 employees. Average EBITDA margins are 7.6%. This masks substantial variation, with providers highly exposed to state-funding at low fee rates struggling to break even.

Survey findings published by the Care Provider Alliance in November 2024 revealed that without enough extra funding[iv]:

• 57% of providers expect to hand back contracts
• 73% will refuse new council-funded packages
• 64% will need to let staff go
• 76% will cut training
• 22% plan to close their businesses

If the government cannot afford a minimum wage increase, it is unlikely they can fund the Employment Rights Bill and Fair Pay Agreement.

Increasing risk

The combination of enhanced employment rights and insufficient funding increases risk. Cash-strapped councils are cutting costs by:

• Delaying assessments until people deteriorate and end up in hospital, shifting costs to the NHS
• Placing people in care homes rather than supporting them at home, forcing house sales to pay for care
• Reducing the number of people receiving support, leading to greater unmet need
• Further squeezing fee rates, making compliance with employment and care regulations more difficult
• Encouraging direct payments at rates below minimum wage costs
• Switching to frameworks and dynamic purchasing systems that auction work to the lowest bidders
• Moving care packages to cheaper providers with no quality oversight
• Pushing more people toward unregulated care options
• Promoting "self-employed" care worker arrangements that bypass employment protections

Such measures risk harm to people needing or receiving care; add burdens to family carers; and increase pressure on NHS services. They may also cost the government more in the long run and restrict economic growth.

Off the radar

Rising costs will tempt more councils and providers to move to off-payroll, unregulated approaches. These are much cheaper and have no:

• Training requirements
• Safety oversight
• Quality monitoring
• Employment protections
• Recourse for citizens when things go wrong

As one provider explained: "If councils won't pay enough to cover the new employment rights, more will push people toward direct payments and unregulated personal assistants. We'll see more cash-in-hand arrangements and workers with no rights at all."

Adding to this temptation is the fact the Care Quality Commission's (CQC) oversight has weakened. As of June 2024, 60% of community social care providers had no rating (23%) or out-of-date ratings (37%). The proportion of providers "Requiring Improvement" has skyrocketed from 0.5% in 2017 to 26.3% in 2024.

Lack of oversight and coordination between agencies allows providers to breach regulations without consequence. This allows unsafe, poor quality care and labour exploitation to continue. Workers face mistreatment through practices like:

• Non-payment for travel time and training
• Inadequate mileage rates
• Making staff pay for their own uniforms and phones
• Demanding international recruits repay costs that should fall to employers
• Poor quality accommodation and threats of deportation

Perversely, the Employment Rights Bill risks driving more care underground, reducing access to support, and leaving fewer workers with employment rights.

Need for reform

To achieve the goals of the new legislation, we also need wider reform. Unless there is a change in homecare funding, commissioning, regulation, and provision, employment conditions in homecare could deteriorate further.

Baroness Louise Casey will start her independent review of adult social care in April 2025. Where might she look for inspiration?

Learning from Australia

Australia offers a markedly different model for funding and delivering homecare, which could inform UK deliberations. Their system puts choice and control in the hands of care recipients while maintaining quality standards. Key features include:

1. Centralised assessment and clear funding tiers

The Australian system, "My Aged Care," serves as a single entry point for accessing care services. Trained assessors conduct comprehensive evaluations to determine eligibility and levels of support. Four levels of Home Care Packages are available, ranging from basic to high care needs, with annual funding from about $10,500 to $61,400 (1 GBP = 2 AUD).

2. Consumer-directed care

Once approved for a Home Care Package, individuals choose their service provider from a list of approved organisations. There are about 900 homecare providers approved to deliver government-funded services for a population of 26 million. The government subsidy goes directly to the chosen provider, with the possibility of user contributions based on income. This approach empowers care recipients and their families to make informed decisions about their care.

3. Market-driven quality

Providers must compete on quality and user satisfaction to attract and retain clients, driving up standards across the sector. The system includes quality inspections every two years and clear standards for approved providers.

4. Flexible and personalised support

The chosen provider works with the individual to create a tailored care plan based on assessed needs and preferences. The funding model allows for adjustments to services as needs change, promoting person-led care.

Innovation in the UK: The Sheffield Model

Closer to home, Sheffield's new Care and Wellbeing Service, launched in March 2024, shows how commissioning might improve through:

• Neighbourhood-based contracts aligned with Primary Care Networks
• Seven-year contracts providing stability
• Focus on outcomes rather than time-and-task
• Investment in workforce development
• Digital care planning capability
• Reduced travel time through geographic patches

Early results show improved continuity of care and worker satisfaction. Staff retention has increased and waiting times and unmet need have decreased.

Path forward

Real reform requires coordinated action across multiple fronts:

1. Consumer choice
   • Easy access for citizens to information and assessment
   • Introduction of a tiered system based on need, similar to Australia's
   • Clear funding levels based on assessed needs
   • Greater user choice in selecting providers
   • Support for informed decision-making
2. Secure funding
   • An immediate injection of £1.8 billion to cover the homecare deficit
   • Multi-year settlement rising to an extra £18.4 billion per year by 2032/33 to meet future demand
3. Improved commissioning
   • Implementation of a National Contract setting legally binding minimum fee rates
   • Move to geographic zone-based commissioning
   • Shift from minute-by-minute to shift-based purchasing
   • Focus on outcomes rather than time-and-task
4. Effective regulation
   • Well-resourced inspection regime
   • Better coordination between the CQC, HMRC and immigration authorities
   • Swift action on safeguarding concerns
   • Hold commissioners accountable alongside providers
5. Worker protection
   • Fair pay at least on a par with equivalent roles in the NHS
   • Payment for shifts, which would enable full payment for travel time
   • Investment in training and development
   • Clear career progression paths

Conclusion

Labour's Employment Rights Bill might worsen employment conditions if under-funded, as councils and providers will cut corners to remain afloat. We need a complete overhaul of the care system to ensure quality care, fair pay for caregivers, and support for families.