A large authority has recently published a tender for home care. It is based in the south of England.
We have traded with the local authority in the past, and it is not a poor authority to deal with. It commissions around 2 million hours of home care per year.
The council has set a price for this year of £22.63 per hour, and pro rata to that for visits of less than one hour. This compares favourably to the UKHCA rate of £21.43.
The local authority also specifies a minimum pay rate for staff of £13.64 per hour.
This is praiseworthy – it sets a floor for pay rates at a reasonably high level.
But wait a minute. Do the numbers stack up?
If we take a half hour service, the price charged will be £11.32, and the pay for the contact time will be £6.82. But now add on all the other costs.
Let’s assume travel time of 10 minutes, so that will be £2.27, holiday pay at £1.10, employer’s NI at £0.69 and pension at £0.27.
Already we are up to a total cost of £11.15 and this excludes any contribution to sick pay, so the margin excluding sick pay is 1.5%.
Normally home care works on gross margins of 30%, which pays for office costs, senior management, registered managers, office staff, supervisors, training, marketing, recruitment etc etc, and of course a profit margin for the provider.
This local authority has got it wrong.
We won’t be tendering for this one.