RWK Goodman: How to navigate the social care financial crisis from an HR perspective

Providers are facing significant financial pressures due to increases in Employer National Insurance contributions and the National Minimum Wage, as well as the underfunding of local authority contracts.

With increased costs taking effect in April, some providers are considering terminating local authority funded contracts, reorganising their workforce, making redundancies, and in some cases exploring the possibility of closing services completely, despite the high demand for care services.

It is critical for providers to consider their employment law obligations in any of these scenarios.

Local authority contracts

In the first instance, providers should negotiate increased rates with local authorities, but this is challenging due to stretched budgets.

If a provider gives notice to terminate its contract, the local authority may transfer services back in-house or to a different provider. Either way, TUPE regulations may apply, with employees transferring to a new service provider on their existing terms and conditions of employment.

If TUPE applies, providers need to identify which employees, if any, would be in scope, although this in itself if often an area of dispute between existing and new employers, often with a view to avoid redundancy and notice costs if the people aren’t following the work. If employees are in scope, the existing provider would be under a legal obligation to inform and consult with the affected employees. Depending on the numbers of employees, collective consultation rules may apply, with failure to do so could result in up to 13 weeks’ gross pay per employee.

Reorganisation and redundancy

Ongoing financial pressures are causing some providers to consider reorganising their business and make some roles redundant, either to reduce overheads or to reflect a reduction in work if local authority contracts are terminated.

From the outset of any redundancy or restructuring process, providers must consider how many staff would be impacted, including the total number of any proposed redundancies. This will indicate whether collective consultation rules apply, as well as the length of any consultation process. The threshold tests for triggering collective redundancy obligations are complex so providers should take advice. Failure to comply could result in a protective award of up to 90 days’ gross pay for each employee who is made redundant.

Practical tips

Despite numerous requests for help, it does not seem that any last-minute changes or additional money will be made available from the Government. As such, providers should update their financial models to account for increased costs, as well as review the financial viability of their existing contracts. If there are concerns, seek to renegotiate more favourable terms, including streamlining operations and implementing efficiency savings where possible. If, however more drastic steps are required, such as terminating contracts or making redundancies, ensure compliance with legal obligations, to avoid significant financial liabilities.

Chris Amys

Associate