The Chancellor’s 2024 Budget, leading to reforms in National Insurance costs to employers, will be an important element to consider in amongst the existing inflationary factors that continue to affect the cost of care. But how exactly does the Budget affect this cost and what might the implications be for the gap that already exists between the costs of care provided by an agency and those directly employed by a claimant?
The changes of most relevance to care arise in two forms:
The main points to note in respect of ENIC are the following changes that will apply from April 2025:
The changes mean that employers (whether that be the claimant who is directly employing the carer or the agency that is doing so) can avoid paying ENIC only up to the first £5,000 of their liability, so that contribution arises sooner and at a higher level.
The positive is that the Employment Allowance will increase, which might be offset against the level of ENIC. It is important that Employment Allowance is factored in to directly employed regimes given the significant effect it has on the annual figures. Some care experts are prone to excluding this or leaving it for legal submission.
((Employee cost – (Nil rate x Number of carers)) x ENIC rate) – Employment Allowance
Pre-Budget =
((Employee cost – (£9,100 x Number of carers)) x 13.8%) – £5,000
Post-Budget =
((Employee cost – (£5,000 x Number of carers)) x 15%) – £10,500
Package (Carer wage based on Keoghs’ care data analysis) | Pre-Budget | Post-Budget | Budget impact |
1 carer 40 hours per week x £16 x 60 weeks = £38,400pa | No ENIC due | No ENIC due | No effect |
2.1 carers 84 hours per week x £16 x 60 weeks - £80,640pa. | Plus ENIC £3,491 Total £84,131 | Plus ENIC £21 Total £80,661 | Reduction £3,470pa (4.1%) |
3.5 carers 24 hour sleeping care 140 hours per week x £16 x 60 weeks = £134,400 | Plus ENIC £9,152 Total £143,552 | Plus ENIC £7,035 Total £141,435 | Reduction £2,117 (1.5%) |
4.2 carers 24 hour waking care 98 hours per week x £16 x 60 weeks = £94,080 Plus 70 hours per week x £18 x 60 weeks = £75,600 Base total = £169,680 | Plus ENIC £18,141 Total £187,821 | Plus ENIC £11,802 Total £181,482 | Reduction £6,339 (3.4%) |
7.7 carers 24 hour, one sleeping, one waking 238 hours per week x £16 x 60 weeks = £228,480 Plus 70 hours per week x £18 x 60 weeks = £75,600 Base total £304,080 | Plus ENIC £27,293 Total £331,373 | Plus ENIC £29,337 Total £333,417 | Increase £2,044 (0.6%) |
8.4 carers 24 hour, two waking carers 196 hours per week x £16 x 60 weeks = £188,160 Plus 70 hours per week x £18 x 60 weeks = £151,200 Base total £339,360 | Plus ENIC £31,283 Total £370,643 | Plus ENIC £34,104 Total £373,464 | Increase £2,821 (0.8%) |
Changes to ENIC should be of no effect in the case of low-level care regimes and it should reduce the value of the majority of directly employed regimes. We start to see increases in the current cost of care for those highest-level care packages that involve periods with the double up of carers.
The above analysis does factor in the Employment Allowance, which will be more generous in future. This is a reminder of the importance of ensuring such an offset is factored in.
Employment Allowance applies per business, not per employee, so the benefit of the Employment Allowance will not be seen to the same extent in the context of agency care. Agencies supply a large number of carers and will soon burn through their Employment Allowance, such that the offset provided will be of little to no effect in the wider context of all the carers they supply.
Package (Carer estimated wage in line with ASHE 6115) | Pre-Budget | Post-Budget | Budget impact |
1 carer 21 hours per week 21 hours per week x £15 x 52 weeks = £16,380pa. | Plus ENIC £1,005 Total £17,385 | Plus ENIC £1,707 Total £18,087 | Increase £702 (4%) |
1 carer 8 hours per weekday 40 hours per week x £15 x 52 weeks = £31,200pa. | Plus ENIC £3,050 Total £34,250 | Plus ENIC £3,930 Total £35,130 | Increase £880 (2.5%) |
3.5 carers 24 hour sleeping care 140 hours per week x £15 x 52 weeks = £109,200 | Plus ENIC £10,674 Total £119,874 | Plus ENIC £13,755 Total £122,955 | Increase £3,081 (2.6%) |
24 hour waking care 98 hours per week x £15 x 52 weeks = £76,440 Plus 70 hours per week x £17 x 52 weeks = £61,880 Base total = £138,320 | Plus ENIC £13,814 Total £152,134 | Plus ENIC £17,598 Total £155,918 | Increase £3,784 (2.5%) |
The agency’s cost of employing carers, ignoring any offsets for Employment Allowance, will increase by around 2-4%, depending on the level of the care package. That increase might be mitigated to some extent by the significantly higher hourly rate that they actually charge for their services when overheads and profit margin are factored in. However one might equally anticipate that, in order to maintain profit margins and also to offset similar increases in the costs they will now face to staff publicly funded social care packages, an increase in the hourly rates charged will follow.
It has long been noted that agency care tends to be more expensive than direct employment in significant packages, and the trend has been towards agency care in recent years due to issues with the supply of carers. When we now compare the effects of the Budget on both care models it is apparent that, in the majority of care regimes, that gap between the costs of agency care and direct employment is only likely to widen, as the costs of many directly employed packages fall whilst the costs of agency packages only look set to increase further.
For more information, please contact: Andrew Williamson, Partner, Care & Rehab SIG member