The Issues revolving around Pay, Financial Challenges, and Workforce Retention in Adult Social Care

The adult social care (ASC) sector in England faces a workforce crisis that is rooted in low wages due to chronic underfunding and a lack of implementation of a strategic workforce plan. Two recent reports, Investigating Variation in Pay in Adult Social Care by the National Institute for Health and Care Research (NIHR) and Manchester Metropolitan University (MMU) and the Care England and Hft Sector Pulse Check 2024, provide an extensive examination of these challenges from complementary perspectives.

While the Investigating Variation in Pay report explores pay disparities, their impact on career progression, and structural inequalities within the sector, the Care England and Hft Sector Pulse Check 2024 takes a broader view of financial pressures, workforce shortages, and their respective policy implications. Together, these reports highlight the urgent need for systemic reform – providing actionable recommendations to improve workforce retention, financial sustainability, and care quality, in light of the Baroness Casey Commission for social care. This article examines the interconnected nature of pay structures, workforce retention, financial instability, and government policy within the ASC sector, exploring how these issues reinforce one another and further presenting solutions to address the root causes of the crisis.

Pay and Workforce Challenges: The Core of the Crisis

One of the most pressing concerns highlighted in both reports is the issue of low pay. Care workers in England are among the lowest-paid employees in England’s workforce, with most earning at or just above the National Living Wage (NLW). The Investigating Variation in Pay in Adult Social Care report provides a detailed breakdown of pay structures, finding that:

• The vast majority of care workers are paid at or slightly above NLW.
• Senior care workers earn only marginally more than junior workers.
• There is minimal pay progression based on experience or qualifications.
• Pay disparities exist along demographic lines, with women, ethnic minorities, and non-British nationals often earning less than their counterparts.

Perhaps most concerningly, the Investigating Variation in Pay report finds that “The average pay of a social care worker is £7,617 less per year than an equivalent role in the NHS, illustrating a staggering 35.6% pay gap.”

The Care England and Hft Sector Pulse Check 2024 supports these findings, noting that 85.7% of providers cite low pay as the primary barrier to recruitment. Additionally, it reveals that:

• 33% of providers reported a decrease in domestic job applications in the past year.
• 40% of providers have turned to international recruitment to fill vacancies.
• Despite wage increases, ASC jobs remain uncompetitive compared to roles in other industries, such as retail and hospitality.

Professor Martin Green OBE, Chief Executive, Care England, outlines that “it is crystal clear that we need a sustained and supported workforce plan that not only makes sure roles are valued financially but offers clear pathways for development and champions the vital work the sector provides.”

Both reports illustrate how low wages contribute to high turnover rates, with workers leaving for better-paying roles in other sectors or seeking agency work for higher pay. The Sector Pulse Check also highlights that 40% of providers reported increasing agency use in direct response to staff shortages – coming at a higher cost and often lacking the training and familiarity required to provide high-quality care. This creates a vicious cycle where low pay leads to high turnover, which in turn increases reliance on costly temporary workers, further straining the financial stability of care providers.

Financial Constraints: A Sector on the Brink

Both reports emphasise that financial instability is at the heart of the ASC crisis. The Care England and Hft Sector Pulse Check 2024 provides a detailed financial overview, revealing that:

• 85% of providers reported that local authority fee increases did not match the mandated rise in the NLW, forcing them to absorb the cost or reduce services.
• 29% of care providers are operating at a financial deficit.
• 3 in 10 providers have closed parts of their organisation due to cost pressures.
• 85% of providers reported that local authority fee increases did not cover the cost of the mandated NLW rise.

The Investigating Variation in Pay Report sets out that “a third of providers report that they are considering exiting the market.”, “Fees are low and do not cover the cost of care, creating financial pressures that drive low pay rates and basic terms and conditions of employment.” And similarly, underscores that local authority fees are insufficient to support sustainable wage growth. It finds that:

• Local authority fee levels have not risen in line with inflation
• Fees are often too low to cover the actual cost of care, leading to financial pressures on providers.
• The lack of funding constrains the ability of providers to offer competitive pay, benefits, or career progression opportunities.

These financial challenges are exacerbated by other rising costs. Sector Pulse Check identifies the drivers of financial pressures, including:

• Increased workforce-related costs (91% of providers cited this as a major issue).
• Delayed or unpaid bills from local authorities, affecting 29.1% of providers.

One of the most alarming trends, highlighted in both reports, is the growing reliance on self-funding residents to subsidise the cost of care. Many providers are forced to charge higher rates to private-pay residents to offset the financial losses incurred from underfunded local authority placements. This not only creates disparities in care quality between homes – but also places additional burdens on families who must cover rising costs out-of-pocket.

Recruitment and Retention: A Worsening Workforce Crisis

Both reports underscore the severe workforce shortages in the ASC sector. Skills for Care presents troubling statistics: which presents troubling statistics:

• The turnover rate in the sector was 24.8% in 2023/24.
• The vacancy rate in ASC is 8.3%, compared to just 2.6% for the overall UK economy.
• International recruitment helped alleviate workforce shortages temporarily, but recent policy changes restricting dependency visas have caused a sharp decline in applications.

Home Office data reports that there were 50,591 ‘Health and Care Worker’ visas granted to main applicants in the year ending September 2024, a 65% decrease compared to the previous year. Two-thirds of providers reported either a decrease or no change in applications of domestic workers in the last year.  These represent the burden on domestic recruitment and the need for a shift in the sector to cope with the regulation from the Home Office.

However, with the recent changes to Home Office policy where proposal to increase Certificate of Sponsorship fees from £239 to £525 per individual, imposing an additional £286 cost per international recruit and the minimum salary threshold for care workers and senior care workers from £23,200 to £25,000 or £12.82 per hour, meaning that international recruits will be paid more than domestic recruits. These policy announcements will directly cause further strain on the sector which heavily relies on international recruitment.

The Investigating Variation in Pay report further explores the factors driving workforce attrition:

• Pay increases alone are not sufficient to retain workers; other factors, such as job stability, benefits, and career progression, also play a crucial role. There are various ways of enticing staff to stay but more must be done by providers to do this.
• Care workers report dissatisfaction with income insecurity, especially those on zero-hours contracts.
• Limited career advancement opportunities discourage workers from remaining in the sector long-term.

These findings highlight the need for a comprehensive workforce strategy that goes beyond wage increases. Skills for Care has created a workforce strategy in light of these issues. While higher pay is essential, it must be accompanied by improved working conditions, greater job security, and structured career pathways.

The Role of Government Policy and Local Authority Funding

Government policy plays a decisive role in shaping the financial and workforce conditions of the ASC sector. Both reports call for increased government intervention to stabilise the sector.

The Investigating Variation in Pay report recommends:

1. Increased Local Authority Funding – Central government should allocate more funding to local authorities to enable higher provider fees.
2. A National Fee Structure – Standardising fees across regions would create consistency and reduce disparities in pay.
3. Clear Pay Progression Pathways – Implementing structured pay scales would incentivise career development.
4. Enhanced Employment Terms – Offering stable contracts, sick pay, and pensions would improve job satisfaction and retention.
5. Sector-Wide Fair Pay Agreements – Establishing minimum pay and conditions would create a more equitable work environment.

The Care England and Hft Sector Pulse Check 2024 echoes these recommendations and adds:

1. Multi-Year Funding Settlements – Ensuring financial stability by committing to longer-term funding agreements.
2. Parity with NHS Pay and Conditions – Aligning ASC wages and benefits with those in the NHS to improve recruitment.
3. Mandatory Local Authority Payment Timelines – Ensuring timely payments to providers to prevent financial strain.
4. Reforms to Immigration Policy – Reversing recent restrictions on dependency visas to support international recruitment.
5. A National Social Care Workforce Plan – Developing a long-term strategy to address workforce shortages and professionalise the sector.

Both reports stress that without decisive government action, the ASC sector will continue to decline, leading to further closures, worsening care quality, and increased pressure on the NHS.

The Future of Adult Social Care: Where Do We Go From Here?

The findings of these reports make it clear that the ASC sector is in a precarious position. Low wages, financial instability, and workforce shortages have created a system that is unsustainable in its current form. However, solutions exist. If policymakers take decisive action by increasing funding, standardising pay structures, and improving working conditions, the sector can be stabilised and made more attractive to workers.

Key takeaways from both reports suggest that:

• Financial investment must be prioritised to prevent further provider closures.
• Pay must be raised to reflect the skill and responsibility required for care work.
• A national pay structure to ensure fair wages and career progression.
• Policy alignment with the NHS to ensure parity in pay and conditions
• Workforce plans must include long-term recruitment and retention plans.
• Government policies must support fair wages, job stability, and professional development.

“The hour to act is now. Without decisive intervention, we risk leaving the most vulnerable adrift in a system that can no longer stay afloat” (Care England and Hft Sector Pulse Check 2024)

With three in ten providers reporting closing parts of their organisation or handing back care contracts due to financial pressures, it is clear the hour to act has been long overdue. By addressing these core issues, the ASC sector can move toward a more sustainable and equitable future—one where care workers are valued, providers are financially stable, and vulnerable individuals receive the high-quality care they deserve.

By addressing these fundamental issues, the ASC sector can become a sustainable, attractive, and equitable profession that is truly valued.