Low Pay Costing Social Care Sector Billions in Hidden Costs, New Research Warns
New research from the Joseph Rowntree Foundation has revealed the true financial toll of low pay in adult social care, warning that persistently poor wages are generating billions of pounds in hidden costs through chronic staff shortages and high workforce turnover.
The report finds that as of March 2024, four in ten adult social care workers in England were earning below the Real Living Wage (RLW), leaving the sector among the lowest-paying in the UK labour market. Despite growing awareness of the recruitment and retention crisis, the research argues that policy debate has focused almost exclusively on the direct cost of increasing wages, while largely overlooking the considerable financial damage caused by the instability that low pay creates.
The research identifies two categories of hidden costs: direct financial costs — including recruitment, training and agency expenditure — and lost output costs, stemming from vacancies, inefficiency during onboarding, and reduced care delivery capacity.
Analysis of provider data found that recruiting a single care worker costs organisations a median of £7,870, comprising median recruitment expenses of £800, training costs of £884, agency cover costs of £3,683, and an estimated £3,288 in staff time absorbed during the training period. These figures exceed the £4,000–£6,000 estimate previously published by Skills for Care and Care England, with the variation largely attributed to differing reliance on agency staff and local market conditions.
Lost output costs were found to compound the financial picture further. The median cost of lost output during the period taken to recruit and train a new care worker was estimated at £9,282 per vacancy.
The report also highlights pay as a central driver of turnover. Qualitative evidence gathered from care providers indicated that nine in every ten care workers who moved roles within the sector received a pay increase upon doing so. While pay is regarded as a “hygiene factor” — a baseline condition for attraction and retention rather than a primary motivator — the research notes that management quality, career progression opportunities, and competition from sectors such as retail and hospitality also influence staff decisions to leave.
Looking at the potential impact of sector-wide pay reform, the research draws on Skills for Care modelling to assess the consequences of raising all care worker pay to at least the RLW. Over a 15-year period, the investment in higher wages would, according to the analysis, prevent lost output costs worth £3.58 billion, save £2.99 billion in recruitment, training and agency spending, and generate £442 million in additional gross operating surplus — more than offsetting a projected £378 million increase in Employer National Insurance Contributions. The NHS, meanwhile, is estimated to save £2.7 billion over the same period as a result of improved social care stability.
The findings are published against the backdrop of the Government’s announcement of its intention to introduce a new Fair Pay Agreement for social care. The Joseph Rowntree Foundation has called for a properly funded settlement that substantively raises pay for care workers, arguing that the business case for doing so is clear.
The report concludes that low pay is not simply a matter of fairness for care workers, though it is that too — it is actively undermining the financial sustainability and service capacity of the sector. Providers, it warns, cannot continue to absorb the compounding costs of turnover indefinitely.
