Extra Employer Costs – Why You Must Include them in Your Care Fees.

As a social care provider, the largest portion of your expenses—by far—is your staff costs.
While most providers know this, many still overlook the additional employer costs that significantly inflate the total wage bill. Ignoring these "hidden" costs can leave your care business underfunded and struggling to cover expenses, ultimately compromising the quality of care you provide.
Let’s delve into two key areas: on-cost and cover cost, which together can add around 40% to your staff bill.
On-Cost: National Insurance and Pension Contributions
From April, the on-cost for employers, which covers National Insurance (NI) at 15% and pension contributions at 3% will (ignoring the 0.5% apprenticeship levy for large providers) rise to 18%.
For every £1,000 in wages you pay a staff member, you’ll need an additional £180 just to cover these statutory requirements.
For a carer on the coming NLW of 12.25 an hour, on-cost will increase that to £14.41 an hour. That extra £2.20 and hour cost to you adds up to £88 a week (on a 40-hour week). Multiply that by the number of staff you employ and their various hourly rates and this can add up to thousands of pounds extra a week.
This is a mandatory expense that cannot be ignored or avoided, and it must be factored into your care fees to ensure financial sustainability.
Cover Cost: Accounting for Absences
Another significant cost often overlooked is cover cost. This accounts for staff absences due to:
- Holidays
- Training days
- Sick leave
- Maternity or paternity leave
Cover cost ensures you can maintain continuity of care while staff are away and typically adds an extra 20% to your staffing bill.
For the carer on April’s NLW of £12.21, which is costing you £14.41 with on-cost, this 20% cover cost increases that hourly rate to £17.29.
That’s your hourly cost as the employer and that’s a 41.6% increase over the hourly rate.
That extra £5.08 extra cost an hour adds up to an extra £203.20 a week. Say you have 10 care staff on the coming NLW of £12.21. Working typically 253 days or 36 weeks a year, that extra £203.20 a week for one carer adds up to £73,152 a year for those 10 carers.
Do the same for all your staff and you see just how significant extra employer cost is.
Without incorporating this into your fees, you risk operating at a loss or cutting corners in other critical areas.
The Financial Risk of Undercharging
Failing to include these additional employer costs in your care fees could have serious consequences, such as:
- Eroded Profit Margins – Your business may struggle to reinvest in training, facilities, or staff development.
- Reduced Quality of Care – Insufficient resources can lead to staffing shortages and burnout, directly impacting the quality of care you provide.
- Financial Instability – Without covering these costs, your business may find itself unable to weather unexpected financial challenges, such as rising energy bills or additional regulatory requirements.
Taking Action
The solution is simple but requires a strategic approach: factor these costs into every care fee you calculate.
The execution less simple but here are the steps to take:
- Use a Care Fee Calculator – Tools like the Care Fee Calculator can help you break down your costs and determine the minimum fee you need to charge to cover all expenses, including on-cost and cover cost. From that you can create accurate care fee quotes, based on the care a person needs and accurately calculated average hourly rates.
- Review Fees Regularly – With these and other rising costs, you should review your care fees at least annually. Right now, with the rises coming in April, your overall cost is going to increase by at least 10%. Without fee increases, that’s an overall profit loss of 10%. I therefore thoroughly recommend you review your current fees based on these rises and not wait until April
- Arrange client fee reviews – Because of this significant increase in your costs in April, having reviewed your fees based on April’s costs, you should arrange client reviews and negotiate fee increases.
Wait until April and you will be vying for these reviews alonside hundreds of other providers in your region. Add to that the fact that commissioners will drag their feet to arrange review meetings because increasing your fees is the last thing they want to do, you could be on fees that return next to no profit or worse a loss for months.
A Real Cost, Not an Optional Add-On
Extra employer costs are not an optional add-on—they are a real and significant part of doing business in the social care sector. By accounting for these costs in your care fees, you protect your business, ensure financial sustainability, and maintain the high standards of care your clients deserve.
Don’t let these hidden costs catch you off guard. Review your care fees now and ensure they reflect the true cost of delivering exceptional care.
You literally cannot afford to ignore this.
If you want some guidance on how to do this, join a series of live webinars I’m giving called, Beyond Survival: How to Protect Your Care Business from April’s cost Rises.
For dates remaining in January, click here: Book Your Place for a January Webinar.
For dates in February, click here: Book Your Place for a February Webinar.
Want to dive straight in and see how much extra employer costs are impacting your business? Try our Care Fee Calculator free for 30 days and take the guesswork out of setting accurate fees.
