Posted by James Sage, Partner
BBC’s Panorama highlights homecare crisis, or does it?
It is well known that the social care sector is in the midst of a funding crisis due to punishing budget cuts and stagnant fee rates. CQC has publicly stated that the sector is “at tipping point”.
Recently, a number of large, high profile care providers (including Somerset Care and Mears Group) have handed back local authority contracts to provide homecare services, saying that they have become financially unviable.
With local authorities in the process of setting new budgets for social care, the BBC’s Panorama took an opportune moment to review the funding crisis affecting the homecare sector.
However, our view is that unfortunately the programme didn’t delve deep enough into the issues affecting homecare providers and insufficient focus was given to the lack of funding, with greater focus on other important, but less critical, issues.
Why are care providers handing back local authority contracts?
There are a number of reasons why homecare providers are in crisis and in some cases have decided to hand contracts back to the local authority. These include:
Insufficient local authority fees
For years council fee rates have been stagnant or if increases have been made they have been below the rate of inflation.
Councils only pay for a worker’s ‘contact time’ with service users
They don’t pay for travel time between service user appointments, or training time, despite providers being legally required to pay staff for both.
Councils’ failure to pay sleep-in shifts in line with the National Minimum/Living Wage
Increased staffing costs
Council fee rates have year on year failed to reflect employers’ increasing staffing costs, including:
the introduction of the National Living Wage, and increases in the National Minimum wage
the introduction of mandatory employer pension contributions (which are increasing from 1% – 3%)
recent case law developments requiring employers to include overtime payments in holiday pay calculations.
Recruitment and retention challenges
Low council rates make it difficult for providers to increase staff pay to enable them to compete with retail businesses and supermarkets (the lowest rate at Aldi is £8.40) whilst remaining financially viable.
An inability to meet CQC’s Fundamental Standards
With increased exposure to CQC compliance and enforcement action and a risk of breaching financial covenants with lenders.
An inability to make sufficient profit to invest in (and future proof) the business.
What to do if handing back a contract?
If your contract with the local authority has become unviable and you want to bring it to an end, it’s important to do so in a lawful way – complying with the terms of the contract, the TUPE regulations and the duties you owe to your service users.
Council contracts will contain termination, transfer and change of control provisions, which require certain notifications to be made in the event that the contract is ended or transferred to another provider. To avoid being in breach of contract, providers need to comply with these provisions.
The contract may have provisions requiring the transfer of staff to the incoming provider. These may trigger a requirement to consult and inform with staff under the TUPE Regulations. Alternatively it may be necessary to undergo a redundancy process, which will need to be carried out legally in order to avoid claims.
If handing back the contract results in the closure of the business then additional steps will need to be taken including applying to de-register with CQC/CSSIW.
What now for providers?
According to the research carried out for Panorama by Opus Restructuring and Company Watch, 69 home care companies have closed in the last three months and one in four of the UK’s 2,500 home care companies are at risk of insolvency.
This may mean that we see a further increase in providers facing tough CQC enforcement action or exiting the market.
If you are facing difficulties because of the funding crisis, you may need to seek professional legal advice on:
Fee negotiations with local authorities
Terminating local authority contracts and TUPE advice
Challenging CQC inspection reports and enforcement action
Advice on exiting the market
If you feel that your business could be affected by these issues and would like a free initial consultation, please contact James Sage on
01225 730 231 Email us
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