Providers warn of harm to social care users and strain on carers as national insurance hike kicks in

The rise in employers’ national insurance contributions (NICs), which came into force yesterday (6 April 2025), risks causing harm to people with care needs and more strain for carers, care provider leader have warned.

Sector associations have claimed that many services face closure, leaving people without much-needed care, due to employers now paying a NICs rate of 15%, up from 13.8% previously, on employee earnings above £5,000 a year, down from £9,100.

But while public sector organisations had their increased costs covered, this was not applied to the adult social care sector, with the government successfully overturning an attempt by the House of Lords to enact such an opt-out.

Cost of almost £1bn to sector

Think-tank the Nuffield Trust has calculated that the change will cost independent care providers in England an extra £940m in 2025-26, alongside a further £1.85bn from this year’s 6.7% rise in the national living wage (NLW).

Councils should meet about £2bn of the combined £2.8bn cost, said the trust, because they purchase about 70% of care provided by the independent sector.

But while the government has claimed that English councils with adult social care responsibilities will have up to an additional £3.7bn in budget in 2025-26, approximately £1.2bn of this is dedicated to adult social care.

Council fee rises lag well behind cost increases, say providers

The Homecare Association, which represents domiciliary care providers, said that its members faced an average increase in costs of 10% in 2025-26; however, council fee increases were averaging about 5%, based on data it had collected so far.

It said that some councils had frozen fees, while others offering higher percentage rises were starting from a low base.

Last year, it reported that there was a £1bn shortfall between the fees paid by councils and NHS commissioners in England and the amount home care providers needed to pay staff at least the NLW, meet other costs and make a minimum profit or surplus.

Since then, the association’s calculation of the minimum price for home care in England has risen from £28.53 to £32.14 per hour. This is mainly due to the NICs and NLW rises, though it has also uplifted its minimum profit level from 5% to 7% of costs, based on recent research.

‘Risk of harm to individuals and strain on carers’

Commenting on the impact of the increased costs, chief executive Jane Townson said: “We are likely to see an increase in non-compliance with regulations, insolvencies and provider closures.

“This risks harm to individuals; greater burdens on unpaid carers; and more pressure on NHS services. We call on the government to provide adequate funding for vital homecare services.”

Care England chief executive Martin Green offered a similar message, saying fee increases from councils did not reflect the “enormous increases” in cost that providers were facing.

“[This] will drive some services into bankruptcy, and the impact on both people who are supported, and care staff will be catastrophic,” he added.

Bridging fund proposed to mitigate impact on providers

Meanwhile, the National Care Forum (NCF), which represents not-for-profit services, has written an open letter to chancellor Rachel Reeves suggesting a way to mitigate the impact of the NICs rise on providers and prepare the sector for the government’s planned fair pay agreement.

It urged the Reeves to set up a “bridging fund”, equivalent to at least the sector’s losses from the NICs rise, to enable employers to make the transition to the fair pay agreement.

Under this, an Adult Social Care Negotiating Body would be created, to make agreements about the pay, terms and conditions of adult social care workers in England, in a move designed to raise salaries across the sector.

The bridging fund – an idea conceived of by NCF member Methodist Homes – would be allocated based on an organisation’s number of employees and could be paid direct to providers or administered by local authorities, the open letter said.

‘Not too late for government to step in to safeguard services’

NCF policy director Liz Jones said it was “not too late” for the government to address the impact of the employer NICs rise on people who needed care and support.

She added: “Without action, we are concerned that hundreds of thousands of people with learning disabilities, autistic people and older people, as well as their wider communities, will not be able to access the vital services they need to live fulfilling lives as a result of the predicted shrinkage of care and support services resulting from these measures.”