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Published 4 November 2020
Yesterday morning the Office of National Statistics (ONS) released the latest tranche of data tracking hourly rates paid to care workers, home carers and senior care workers in the UK. The data comes from the ONS Annual Survey of Hours & Earnings (ASHE) in the UK, which is in turn subdivided into four digit Standard Occupational Classifications. The classifications relevant to care workers are ASHE 6145 and 6146, with composite figures being referred to as ASHE 6115. This year’s figures for the 70th to 90th percentiles of ASHE 6115 were as follows:
This data is available on the ONS website which can be accessed using the link HERE.
ASHE 6115 data is firstly of importance to compensators because it affects the level of their annual outlay in respect of Periodical Payments Orders (PPOs). However, it also provides an indication of the level of care costs more generally.
Claimants compensated by PPOs normally receive their damages as annual payments over the course of their lifetime (or, less commonly, some other defined period) and, in order to ensure that those payments keep pace with inflation, they are index linked. ASHE 6115 is the most commonly used index for this purpose because most damages paid under PPOs involve Claimants’ care costs. The 70th to 90th percentiles of ASHE 6115 are the most commonly adopted percentiles with the 80th percentile being the default one.
The newly released figures, which relate to hourly rates in April this year, reflect a continuing upwards trend in the cost of care throughout the UK. Whilst there have been isolated instances of reductions in the hourly rates, specifically in 2011 and 2014, the general picture has been one of steadily increasing rates in line with the general increase in earnings. However, with the exception of the 90th percentile, the percentage increases in this year’s figures is higher than last year, marking an acceleration in that upwards trend and also exceeding the increases in the hourly rates for all employees (not just carers) which ranged from 2.84% to 3.22% over the same percentiles.
As a consequence of this, compensators will this year see another increase in the level of payments that they make under individual PPOs linked to ASHE 6115. In addition, the level of increase in carers’ hourly rates will no doubt compound market concerns around the increasing cost of care in the UK, its impact on indemnity spend and with that the impact on UK insurance premiums. However, given all the turmoil that the UK currently faces around COVID-19 and the impending end to the transition period following its exit from the European Union (EU), are we likely to see a different picture next time around? What might the ASHE 6115 figures look like in 2021 in the wake of a year of lockdown turmoil and following the end of freedom of movement of workers between the UK and EU countries?
In general terms, COVID-19 has had a very negative impact on the UK employment market and on earnings, as reflected by recent headlines pointing to unemployment rates being higher now than at any other time over the last three years and also the Average Weekly Earnings index (AWE) for the whole economy which stood at -1% in April (i.e. the same month as the ASHE data relates to). However, the impact will obviously vary from sector to sector and, whilst a direct comparison cannot be drawn between AWE (a measure of earnings) and the hourly rates contained in ASHE (a measure of rates), the ASHE 6115 figures outlined above indicate that the care sector may fare better than many. As those figures are based on information gathered in April, they will not capture the full impact of COVID-19, but with care workers being key workers the frequency of furlough within that sector is likely to have been low and the perceived value of their work will, if anything, have increased as COVID-19 has served to highlight the importance of that.
As regards the end of the transition period, with a disproportionately high level of foreign workers being employed within the UK’s care sector, the commonly held view has been that the UK’s exit from the EU and the resultant constraints on the ability of EU workers to continue working in the UK would bring about a short fall in the supply of care workers. Set against a stable level of demand for care services, the perception has been that this will inevitably lead to a rise in care workers pay. It was thought that this factor would start to bite following the end of the transition period at the end of this year, but there is some evidence of an ebb of EU workers away from the UK already being well underway, in which case the figures published yesterday may already reflect this to some extent.
Looking at the broader picture, these combined factors would seem to offer little comfort to compensators when it comes to the direction of travel in care rates over the next year. However, the COVID-19 related increased unemployment in the UK and changes in the perceptions around care workers might result in more UK based workers graduating into the care sector, with that at the very least having the potential to ease any crisis of supply caused by Brexit. It will be interesting to see how these factors play out in next year’s figures.
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