National Living Wage (NLW)

From 1 April 2016, the government introduced a compulsory National Living Wage (NLW) for workers aged 25+. Chancellor of the Exchequer George Osborne had announced this new requirement in minimum wage legislation in his Summer Budget speech in July 2015.

The NLW started at a rate of £7.20 per hour – 50p higher than the National Minimum Wage (NMW) at the time – and the government planned that it would rise to £9 per hour by 2020.

Impact on social care

In their joint 2015 Spending Review Submission in September, the Local Government Association (LGA) and the Association of Directors of Adult Social Services (ADASS) described the announcement of the NLW as ‘a welcome and important development’. But, they warned that implementing the NLW in ‘the absence of certainty of funding’ would exacerbate existing pressures on the adult social care sector.

The LGA and ADASS estimated that introducing the NLW for residential and home care staff alone would result in additional costs of £330m in 2016/17 and £834m by 2019/20. As a result, the LGA and ADASS stated there were ‘real concerns about the viability and sustainability of some providers within the care market.’

The Low Pay Commission – the independent body advising the government on the minimum wage legislation – analysed the impact of the NLW in its Autumn 2016 report. In social care, the Commission found that ‘the NLW had raised pay without so far damaging employment, or having other negative effects’. However, the report highlighted adult social care as among the sectors reporting serious concerns to them about the NLW, with care providers warning them of ‘serious risk of catastrophic failure’ without appropriate funding and ‘some reports of withdrawal from contracts’.