George Osborne's headline-grabbing Budget commitment to a substantially increased national living wage caught charity bosses on the hop. Four months on, Jewish Care chief executive, Simon Morris, can put a price on it in his charity's terms - and it is a high one.
The living wage replaces the current minimum wage of £6.50 an hour for over-25s. It will rise to £7.20 from next April and to at least £9 from 2020. The impact will be significant for welfare charities, particularly those providing residential care for the elderly, which are already feeling the pinch following reduced local authority contributions.
Having last year awarded a nine per cent salary rise to the lowest paid 17 per cent of its workforce, Mr Morris estimates that meeting the £7.20 minimum from April 2016 will be a manageable £150,000. It will be a different story in 2020, given that half its 1,400 employees currently earn below £9 an hour. His estimate is that the charity will have to find at least £2 million annually to meet the extra staffing costs.
Those on the lowest wage scale include domestic, cleaning, kitchen and laundry staff. "But by 2020 it's impacting on care staff - and we are talking front-line care staff," he points out. "A care worker in a home, a home care worker, a member of staff in one of our dementia day centres, a member of staff in the Sobell day centre [Golders Green] - the bulk of our staff who do the care."
Mr Morris - who "fully supports" the principle of raising salary levels for the lowest paid - says the £2 million estimate does not take account of the fact that Jewish Care has traditionally paid above the minimum wage in order to attract the best staff.
If people want quality services they have to find the money Simon Morris
He also highlights an unintended consequence of the Chancellor's move; the effect on pay differentials. "Everyone knows that at work, differentials are important. Therefore, if we've moved all our carers on to £9 an hour, then the gap between being a carer and being a team leader is very small. And the team leaders have great responsibility.
"So we are trying to work through the knock-on effect. But it's difficult to come up with a number because the government's figure could end up being over £9."
With residents accepted solely on the basis of need, rather than ability to pay, two-thirds of those in its care homes are funded through local authorities. Care requirements have to take account of the fact that people now enter a home in their 90s with a greater level of frailty. The average weekly shortfall between the cost of care and the local authority allocation is £371 per resident, leaving a budgetary hole currently exceeding £3 million annually, even after contributions from families.
Though appreciating the plight of cash-strapped councils, "we have to look to local authorities to increase contributions," he says. "If people want Jewish Care to provide services to the quality they desire, they have to find the money."
Jewish Care is already facing a more competitive recruitment market as some high-street names are applying the salary rises ahead of the living wage implementation date.
As Mr Morris puts it: "Are you going to work with some very frail, vulnerable people, doing hard, physical work? Or are you going to earn £9 an hour working in Aldi stacking shelves?"
Assessing the wider picture, he believes some care providers will exit the market, "so the impact on the NHS will be massive".
The charity is working with staff to see where efficiencies can be made - optimum use of sites is one example - "without compromising quality. Everything is open for conversation but at this point there are no plans to close services." Or make redundancies. "If you take staff out, the quality goes down."
At children and families charity Norwood, chief executive Elaine Kerr is also having to deal with a changing job market following the Chancellor's announcement.
"We find ourselves competing with other employers, for instance supermarkets, who are advertising at £9.50-£10.45 per hour," she says.
Norwood's largest staffing group is support workers for adults with learning needs. "There is a significant national shortage of support workers in the sector, and recruitment in recent years has proved very challenging," Ms Kerr explains. "Therefore, in order to attract and retain staff with the ability to work in often challenging settings, we are already paying a rate equivalent to the top end of the living wage [the Living Wage Foundation calculates this at £8.25] to this group of staff.
"We rely on the local authorities who contract with us for these services to meet our staffing costs. With their decimated funds, some local authorities are struggling to contract for our staffing levels at the current living wage, let alone the level it will increase to.
"If there is no corresponding rise in local authority funding, then the charity will find itself in a very difficult financial situation. Many contracts already run at a deficit as our funding is insufficient to sustain our high quality and holistic service provision.
"Cuts in statutory funding [40 per cent in adult social care since 2010] and a shortage of workforce have already put our services under severe and unrelenting pressure."
At Nightingale Hamerson, which administers homes in north and south London, chief executive Helen Simmons says the goal is to achieve fair pay for staff without jeopardising the quality of care.
"High quality care does not, and should not, come cheap. Most of Nightingale Hammerson's staff are already paid above the UK living wage and we are moving towards paying all staff in line with, or above, the UK living wage by April 2016."
Nightingale Hammerson currently employs 378 staff. Of these, 45 will need to be brought up to the £7.20 living wage next year at modest extra cost to the charity. "Our commitment as an organisation is to achieve the government's target of £9 per hour by 2020," she adds, going on to highlight another issue. "We have calculated the financial impact for the next four years and recognise that the increase will put pressure on the contractors who provide services for us. Ultimately they may pass this on through increased charges."
