Nicola’s Blog – What the Fair Pay Agreement means for you

What the UK government’s Fair Pay Agreement means for independent social-care providers — costs, staffing and practical next steps

The government has moved quickly to put a Fair Pay Agreement (FPA) for adult social care at the centre of its workforce strategy. FPAs create a legally-enforceable, sector-wide floor for pay and certain terms and conditions negotiated between employers and unions via a new negotiating body. For independent social care providers — who already operate on very tight margins— the change is significant. Below I outline what’s likely to change on cost and staffing, and give practical steps independent social care providers in Surrey can take now.

A brief background

• The government has ring-fenced an initial £500m and signalled the FPA could come into force in 2028 after the negotiating body and secondary legislation are put in place. The question is whether £500m is sufficient.
• FPAs will legally binding and apply across the sector unless the negotiated scope explicitly excludes some groups which is under review now.  This means independent providers will very likely have to comply once an agreement is made.
• The likely outcome will be higher direct wage costs, possible changes to shift patterns / minimum hours and administrative/compliance costs.  This will put pressure on already very tight margins.

How FPAs work

An FPA is a form of sector-level collective bargaining: employer and union representatives (via the new Adult Social Care Negotiating Body) negotiate minimum pay rates and other minimum terms which, once agreed and made into secondary legislation, become legally enforceable across the sector. The government has just launched a consultation on the process and plans to set up the negotiating body by 2026, with the first agreement expected to be negotiated 2027 and come into force in 2028. Do take the time to familiarise yourself with the consultation.

Likely cost impacts for independent providers

1. Wage bill increases will be the main effect.
   Most analysis and government commentary assume an FPA will set a higher minimum floor for care workers.  Some campaigners are pushing figures in the £13–£15/hr range for home based and care home roles. Raising pay to those levels without adequate additional finding would raise care providers’ wage bills substantially (and immediately for providers already paying near the current minimum). National findings and sector bodies warn that councils and providers will see increased costs.
2. Employment costs beyond basic pay will rise.
   Employers should budget for increases in NI contributions, pension contributions, holiday pay and the wider effects of banded pay increases for different role levels. The government’s own impact analysis has flagged increased costs for commissioners and the independent sector
3. Short-term cashflow pressure from contract rates.
   Many independent providers operate under fixed-price Council contracts that do not immediately reflect increased wage costs, and have annual increases applied that are often insufficient. If contracts are not re-priced or additional funding is not passed through, providers will face squeeze on margins, and the likely impact could be the handing back of contracts and a greater focus on private business.
4. One-off implementation and compliance costs.
   Expect administrative costs to map pay scales, update payroll systems, renegotiate contracts, train staff on new terms and monitor compliance. Smaller providers with limited back-office capacity will feel these fixed costs proportionally more. Our legal partners RWK Goodman offer further insight on this area.

Practical actions for independent providers — a checklist

1. Run a short-term financial impact model now.
   Model several scenarios and include NI/pension/higher-paid band ripple effects. Use this to identify break-even rates and cashflow risk. Having this evidence base will support any approach to commissioners.
2. Talk to your payroll and HR suppliers.
   Ensure systems can handle new bands, retro pay, and different terms (minimum hours, travel pay, overtime thresholds). Budget for one-off set-up costs.
3. Prioritise retention measures you can afford now.
   Flexible rotas, better rotas/route planning for homecare travel, recognition and low-cost career routes (micro-learning, mentoring) can reduce immediate churn while the FPA is negotiated.
4. Plan for staged implementation.
   If the FPA is phased in, plan payroll and contract responses in tranches — this eases cashflow and operational shocks.

Final point: Surrey Care Association will continue to be there for our members to advocate on your behalf.

Now more than ever, membership of a representative trade body is essential.  Here at Surrey Care Association we will ensure we deliver collective responses to the government consultation and to the County Council, and we will continue to offer guidance and support through this process.  If you are not yet a member of SCA and you would like to be, please do reach out using the contact us button.