We are days from the end of April and you will need to run this month’s payroll.
Without a doubt, this payroll will see a significant rise in your staff wage bill.
What you do next will be vitally important to the health of your care business.
In case you needed reminding, the National Living Wage has increased from £10.42 to £11.44 and the National Minimum Wage has risen from £7.49 to £8.60 for those 18 to 20 year olds and for apprentices and those under 18 has risen from £5.28 to £6.40.
Plus, last year there was a lower rate than the NLW for those 21 to 22 and it was only those 23 and over who qualified for the NLW rate. Not this year, the NLW now extends to encompass all who are 21 and over.
So, if you have staff aged 20 to 21 and previously on the NMW of £10.18, their hourly rate will also climb to £11.44.
And I assume you’ve increased the rates of those staff on higher rates than the NLW in order to maintain the wage gap.
This all points to your staff costs increasing significantly.
And because your staff cost is such a large part of your overall costs, these rate rises could have a major impact on the financial health of your business.
So, I have three questions for you:
1. How much is your staff cost going to rise by?
2. What impact will it have on the financial health of your business?
3. What do you intend to do about it?
If you don’t know how much your costs are going to rise by then you are blind to what’s coming and will be reactive to the situation you find yourself in.
Hopefully you do know how much your staff cost is going to increase by and hence how much your overall breakeven point is going to increase.
Without increasing your fees, this increase in your breakeven point – the point at which your revenue equals your cost – will of course squeeze the profit you make from each client fee.
And as this isn’t a sector for making high profits, for some this increase could make the difference between making a small profit or tip them over into making a loss on some clients.
If you haven’t worked out the cost increase that will hit you in a few days and the impact that will have on your fees, I strongly urge you to do so as soon as possible.
And it is never too late to assess the financial impact by reviewing each of your current care fees.
Instead of taking you through what you should do here in this post please read my post, How Much Will Your Costs Increase on 1st April?
In this post I briefly take you through what you should do now if you haven’t already assessed your costs and fees and the tools we have that will help you get this right.
Read post: How Much Will Your Costs Increase on 1st April?
For a more in-depth step-by-step guide to reviewing your fees and negotiating fee increases download my free report, 5 Steps to Make Your Care Business Financially Secure.
Reviewing your fees based on your new costs I would argue is the most important thing you can do right now to protect the future of your business.
This review isn’t simply about adding these costs per client to your current fee and seeing how much profit is left.
It’s about re-creating your fees based on your increased staff (and fixed costs) and higher average hourly rates. It’s about creating detailed accurate new fees for your clients that you can justify should it be clear that the fees they are on is not going to sustain your business financially.
Your costs are going to increase significantly so please don’t hope all will be ok. Take control and make sure. And contact me at chris@qualityofcare.co.uk if you need any help.
