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2021 Minimum Agency Rates and National Living Wage – The Facts

2021 Minimum Agency Rates and National Living Wage – The Facts

Living wages, page freezes and the cost of living have all been high on the agenda this year – as many frontline social care workers face heavier demands and are recognised as imperative to the nation’s health.

However, it’s well worth thinking about how your agency hourly rates stack up, and whether the contingency staff you rely on are being paid fairly…

Because it’s a question, many organisations rarely have time to think about, and could make a massive difference to your staff retention stats!

In this article, we’ll review:

  • The true cost of PAYE employment (and why it’s so much more than an hourly rate of pay!).
  • What it means to be a minimum wage organisation.
  • How the real cost of living compares to the UK minimum rates.

Add in IR35 to the mix, and 2021 looks likely to be a year when we all take a moment to think harder about equality, parity and the welfare of our teams, and in no sector is this so crucial as in social care.

UK Hourly Social Care Rates of Pay: The Breakdown

First off, let’s check out the figures. In April 2021, the National Living Wage increases, by 2.2% or £0.19 per hour.

That includes a new provision for workers aged 23 to 24, whereas currently, you fall into a lower pay band if you are between 21 and 24 (the highest National Minimum Wage at the moment applies to workers who are 25 and over).

Why does that matter so much to care homes and social care employers?

Because most agency staff who work in the care sector are over 23, and therefore it’s likely that some of your contingency staff are being paid at the bottom of the scale.

The National Living Wage is the minimum you can pay somebody, which has applied to anybody aged 25 or older in this past year. Now, the new pay scales apply that living wage to everybody from age 23 and above.

Here is a quick illustration of the 2020 hourly minimums, and how they’re changing in April:

Employee Age National Minimum Wage April 2020 - March 2021 National Minimum Wage April 2021 - March 2022
Apprentice £4.15 £4.30
Under 18 £4.55 £4.62
18 - 20 years old £6.45 £6.56
21 - 22 years old £8.20 £8.36
23 - 24 years old £8.20 £8.91
25 or over £8.72 £8.91

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Now, OUTT is paving the way for a better future for social care employment, and we strongly believe in supporting our professionals and providing rewarding career opportunities.

Therefore, it’s about deciding what rate of pay is adequate to compensate our incredible candidates for the skill, compassion, expertise and diligence they bring to every shift.

And we back that up by paying a minimum, to all social care employees, across the spectrum, of at least £10 per hour – and we’d like to make it even higher!

If you’d like to learn more about whether it is possible to live a good quality of life on a minimum wage, you can check out Living Wage, who does just that.

They calculate that the UK ‘living wage’ – i.e. what you need to earn an hour to live comfortably – is £9.50. Sadly, even with this new increase, the legal minimum still falls short of that by over 6%.

How to Calculate the True Cost of PAYE Employment

Next, we’ll work through the ‘true’ cost of employment. The vast majority of social care workforce managers rely on agency staff to cover urgent shifts, holidays and illnesses or back up their teams when demand runs high.

With IR35 coming into force from April 2021, it’s more crucial than ever to assess each regular member of agency staff and bring them onto PAYE payroll if the criteria are met.

In many cases, employers and registered nurses don’t wish to do so; sometimes because of the related on-costs. In more cases, they have chosen to work flexibly to have better control over their shifts, career and working hours.

OUTT is a fully compliant IR35 employer, taking the strain away from care facilities and offering the same reliability and flexibility as a traditional agency, but with costs fixed at a static 10% to keep agency staff employed on their own terms, and reduce agency staffing costs for employers.

One of the significant issues in social care agency staffing is that there is often a distinct lack of transparency in what an agency pays the worker, and what they charge the employer. We want to change that.

Employment costs can add up to 30% to the hourly expense, with elements shown below as an example for typical care home staff based on the current average pay rate:

Role Hourly Rate Holiday Pay (12.07%) National Insurance (13.8%) Apprenticeship Levy (0.5%) Pension Auto-Enrolment (3%) Total On Costs True Hourly Cost
HCA - Days £8.72 £1.05 £1.35 £0.04 £0.26 £2.70 ££11.42
HCA - Nights £10.00 £1.21 £1.55 £0.05 £0.30 £3.11 £13.11
RGN £18.00 £2.17 £2.78 £0.09 £0.54 £5.58 £23.58
Days
RGN - Nights £21.00 £2.53 £3.25 £0.11 £0.63 £6.52 £27.52
Nurse in Charge - Days £20.00 £2.41 £3.09 £0.10 £0.60 £6.20 £26.20
Nurse in Charge - Nights £23.00 £2.78 £3.56 £0.12 £0.69 £7.15 £30.15
Role Hourly Rate Holiday Pay (12.07%) National Insurance (13.8%)
HCA - Days £8.72 £1.05 £1.35
HCA - Nights £10.00 £1.21 £1.55
RGN £18.00 £2.17 £2.78
Days
RGN - Nights £21.00 £2.53 £3.25
Nurse in Charge - Days £20.00 £2.41 £3.09
Nurse in Charge - Nights £23.00 £2.78 £3.56
Apprenticeship Levy (0.5%) Pension Auto-Enrolment (3%) Total On Costs True Hourly Cost
£0.04 £0.26 £2.70 ££11.42
£0.05 £0.30 £3.11 £13.11
£0.09 £0.54 £5.58 £23.58
£0.11 £0.63 £6.52 £27.52
£0.10 £0.60 £6.20 £26.20
£0.12 £0.69 £7.15 £30.15

So, do you really know how much your agency is paying your contingent staff?

Do you think it’s feasible that their agency commission rates include all of those on-costs that staff are entitled to?

The problem is that if an agency is charging anything below £11.42, rising to £11.68 from April, it’s distinctly possible that, either:

  • They are knowingly making a loss on each hour of employment, or,
  • Your staff are being paid beneath the legal minimum, or,
  • Agency workers are not being provided with their fundamental employment rights.

In general, we’d advise that any rate below £12 requires further investigation – particularly with regulations tightening up with the new employment laws being introduced.

What Does Being a Minimum Wage Organisation Mean for Your Care Facility?

We appreciate that for many social care employers, the news of a pay increase can feel like another pressure on a strained budget.

Still, we’re here to demonstrate that you can save a substantial amount on recruitment costs and staff training by paying your staff a fair wage!

Being a minimum wage employer, whether directly or through an agency, can cost you a lot more than 2.2% in the long run:

  • Staff who feel they are unfairly paid are much more likely to seek work elsewhere.
  • Low rates of pay can lead to low morale and a lack of commitment.
  • Workers struggling with income might find it harder to respond to urgent shift requirements or deal with any tasks that expand on their remit.
  • Productivity is proven to be higher in satisfied employees – correspondingly; low pay means lower work rates, the need to hire more staff, or pay for more hours, to complete the same amount of work.
  • Recruitment costs can be high, so replacing staff means an additional cost and time – from interviewing, advertising, reviewing CVs, training, and induction periods to ordering new uniforms.
  • Managers can struggle to continually train new team members, leading to lower skill levels, lack of sufficient training and inadequate care standards.

For OUTT, our commitment to an hourly rate of pay far above the minimum isn’t just about recruiting the best quality candidates, who want to stay with us.

It’s about long-term returns for our social care employers, who evaluate their staff and find that, the better the rewards, the better the job satisfaction, the higher the standards, the higher the skill level, and the happier the workforce.

  • If you’re not sure what your care home staff agency pays?
  • Or the rate seems to be suspiciously low?
  • If you’re concerned about your staff retention figures, and why recruitment is costing so much?

We hope we’ve given you some guidance to get to the bottom of those issues.

For more information about the OUTT way of working, and to get on board with an IR35 compliant agency who provide a best in class service for both employers and our candidates, get in touch or register today.