The Government’s new points-based immigration system poses a serious challenge for small domiciliary care firms.
Last week, the Home Secretary, Priti Patel, announced a big change to how immigration works in the UK. The new system brings immigration from the EU in line with rules for the rest of the world, starting from January 2021.
The social care industry relies more on workers from overseas than other sectors. Around 16% of the workforce are foreign nationals. Fewer immigrants will mean more staff shortages for care firms, which could squeeze smaller providers to the point of closure.
Carry on reading for a more detailed explanation of the new system – or click below to skip straight to our recommendations for protecting your business.
How will the new points-based immigration system work?
The new system is based on points, which are awarded to migrants who meet certain criteria. Anyone who wants to move to the UK must meet a 70-point threshold. There are two compulsory criteria, which add up to 50 points.
• Have a job offer from an approved employer at an appropriate skill level.
• Speak English.
Migrants must make up the remaining 20 points from the following criteria.
• Earn at least £25,600 per year at their UK job. (20 points)
• Earn between £23,040 and £25,599 at their UK job. (10 points)
• Have a job in a shortage occupation. (20 points)
• Have a PhD in a subject relevant to the job. (10 points)
• Have a PhD in a STEM subject, which is relevant to the job. (20 points)
Immigrating to the UK will become impossible for lower-paid workers, especially those who don’t have a degree. The current list of shortage occupations mostly includes degree-level jobs, such as nurses and social workers.
How will the points-based immigration system affect staffing in social care?
Social care is one of the most volatile industries in the UK, in terms of staffing. One in three workers leave social care each year, according to the Care Association Alliance.
An industry that loses staff so regularly needs a reliable pool of workers to fill these vacancies. Immigrants from the EU and the rest of the world have often stepped in to take these roles.
8% of the current social care workforce are EU citizens – around 115,000 workers. While many of these employees will have obtained settled or pre-settled status in the UK, the rapid turnover in the industry is likely to mean more staff shortages in the future.
Businesses have been encouraged to fill these vacancies with British workers. In 2019, it was estimated that there were 110,000 vacancies in the social care sector.
The points-based immigration system isn’t due to come into effect until January 2021, but the available workforce is already limited. Employment is at a record high level in the UK.
Low hourly rates from councils will push care providers into a tight spot
Instead of relying on the immigration system, the Government has encouraged employers to invest in staff retention and productivity.
The easiest way to attract new employees and retain current staff is to increase wages. For smaller domiciliary care firms, it will be very difficult to absorb this cost.
Rates paid by local councils for domiciliary care have struggled to keep pace with the figures recommended by the UK Homecare Association.
The chart below shows this difference is set to grow in the next three years.
More funding cuts are expected to local government in 2020-21, which will have a knock-on effect on providers’ already-squeezed budgets.
Increasing wages to attract more British workers to social care will reduce profit margins. Many smaller domiciliary care firms are already working to a very tight budget. These changes could mean many providers are forced to cease trading.
Reform to the immigration system also arrives at a time when demand for social care is increasing.
How can domiciliary care firms prepare for the new immigration system?
Acquire or merge with other care providers
Strength is in numbers. Merging your business with other care providers – or acquiring them if you have the available capital – will allow you to spread operating costs more evenly. A merger will also give your firm access to a larger pool of workers.
Streamline your costs with better accounting and bookkeeping
In a challenging financial climate, an experienced accountant is worth the investment. An accountant will help to manage your cash flow more effectively and spot any allowances that your business can claim. They’ll also ensure your tax returns are free from potentially costly errors.
Automate and update as much as possible
The Government has recommended that businesses invest in automation to replace migrant workers. While replacing care workers with robots is clearly impractical, we do recommend automating as much administrative work as possible. This will cut overheads and save time. Using Xero to maintain your records will speed up your bookkeeping.
Put pressure on politicians to add care workers to the shortage occupation list
The Government has previously considered an exemption to the new immigration system for the social care industry. Sustained pressure from care providers could help to sway their opinion. We recommend writing to your MP about the issue.
How can Appleby Mall help my care business?
We’ve been working with domiciliary care firms for several years. Our accounting and bookkeeping services are fast and reliable.
We’ll also be able to guide you through any potential acquisitions and mergers – or help you to find a buyer for your firm.