The largest communal welfare charity outside of London will have to find more than £500,000 by 2020 to meet the national living wage.

Chief operating officer at The Fed in Manchester, Mark Cunningham, calculates that the cost to the charity, which employs 350 people, will be at least £80,000 next year, when the hourly living wage rises from £6.50 to £7.20.

Those who earn beyond £7.20 will also receive pay increases designed to maintain wage differentials. The charity is also raising the pay of those under 25, who are exempted from the legislation, in line with the living wage.

He feels that it would otherwise "demoralise staff, who by virtue of their age would be getting paid less for doing the same job".

Mr Cunningham adds that by 2020, lower-paid staff will have received an increase in salary of 30.4 per cent, in keeping with government-mandated policy. He predicts that within the sector, rising staff costs "will see many care providers go out of business by 2020".

He says the extra cost to The Fed will be close to £550,000 in total by the time the £9 an hour minimum takes effect in five years and would have "huge consequences".

"At the same time that [local authority] funding has effectively reduced and costs are set to spiral, the needs of the people we care for are increasing. People have more complex needs and require more help and, therefore, more staff.

"We have no plans to reduce staff but we do need to bridge the funding gap. Individuals and families will have to contribute more and we will have to fund-raise more to support those with no families to help them.

"We will have to find other ways to reduce costs or charge for some services that were once free."

The Fed receives "just £2.55 per hour per resident from the local authority towards providing care", yet will be paying care staff a minimum of £7.20 - and its qualified nurses more than £13 an hour.