A TWO-TIER care home system could be created if proper funding is not offered to pay staff the new national living wage, the Government has been warned.
A study by the Joseph Rowntree Foundation (JRF) found that the new adult rate of £7.20 an hour from next April will cost £387m a year for low-paid care home workers.
Around half of care home staff – 300,000 people – will be eligible for a pay rise when the new rate comes in for over-25s, with the lowest paid receiving £640 a year, said the report.
But the JRF warned that the extra costs will come in when many care homes are already under financial pressure.
The new wage will put care homes with a large number of local authority places at a “financial tipping point”, it was warned.
JRF said higher wage costs would be too large to fill without extra funding.
The study, written by Lancaster University and the International Longevity Centre (ILC-UK), is the first to examine the impact of the new wage on the care sector.
Three out of four workers would get a pay rise if employers paid the current voluntary Living Wage of £7.85 an hour, and £9.15 in London, said the report.
Julia Unwin, chief executive of the Joseph Rowntree Foundation, said: “The new national living wage is a welcome step towards a higher pay economy with lower need for welfare, and is good news for those working in traditional low-pay sectors, such as care.
“However, care homes are already under financial pressure and if proper funding is not provided to help with these additional costs, the Government risks creating a two-tier care home system where good care is only available to those who can pay for it.
“This would be devastating for those who are unable to meet these costs themselves, and would have an impact on the wider economy. While many local authorities will struggle to meet higher wage costs without further investment, many care providers with self-funded residents will find that their current business plans allow them to absorb the cost. Where possible, these care homes should consider paying their staff the higher, voluntary Living Wage, which would help to reward staff and drive up standards of care.”
Baroness Sally Greengross, chief executive of ILC-UK, said: “It is absolutely right that we pay care workers fairly. Better pay should help with recruitment and retention and should ultimately improve quality of care.
“Additional cost pressures, however, risk the sustainability of social care and it is vital that the spending review results in greater investment in this sector. Social care is in crisis today and some of our most vulnerable citizens aren’t getting the support they need.”
Meanwhile, supermarket Aldi has pledged to increase staff wages to a minimum rate of £8.40 per hour from February. The company has confirmed that all of its UK employees will be paid at least £8.40 an hour, and £9.45 an hour in London, from February 1 2016. Aldi is the latest in a string of supermarkets to announce pay hikes. Morrisons recently said that from March, it will increase hourly staff pay to £8.20, from a previous minimum of £6.83.