Move to implement ‘fair pay’ deal for adult social care

Lucy Townley and Anthony Hollands of Pinsent Masons were commenting after the UK government opened a new consultation in which it outlined how it intends to use powers provided for in the Employment Rights Bill (ERB) to establish the basis on which a ‘fair pay agreement’ for the sector can be negotiated.

The ERB, which is in the late stages of the parliamentary process but is not yet law, provides the government with powers to establish an ‘Adult Social Care Negotiating Body’ for England and write rules in relation to its remit and on how it should operate. Similar bodies are to be established in Scotland and Wales by the devolved governments in operation in those countries.

It is envisaged that these negotiating bodies will operate independently of government but as public bodies, with representation from both trade unions active in the adult social care (ASC) sector and employers in the market.

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The negotiating bodies will work to establish separate ‘fair pay agreements’ for England, Scotland and Wales, which are expected to set minimum standards for pay and terms and conditions but could also cover other employment matters such as training and career progression. The scope of each agreement would be for the negotiating bodies themselves to determine, in line with any statutory restrictions that the government puts in place. The government will need to ratify the agreement before it can have effect, with local authorities to be given a chance to relay their views on the deal before ratification.

Once a fair pay agreement is in place, it will be enforceable by law and will apply to all employers and workers in the sector, irrespective of whether workers are part of a trade union or not. The government said it intends to share guidance in due course to help employers understand whether their workers are covered by the ASC Negotiating Body for England.

The government’s consultation addresses in detail how it thinks the new process should work – from how the ASC Negotiating Body for England would be established, to its remit and how it would operate, to how the negotiation process would work – including how disputes between trade union and employer representatives would be resolved. It also addresses the process for ratification and reporting of the fair pay agreement, as well as how the government could step in to impose a fair pay agreement itself in the event a dispute cannot be resolved.

The government has acknowledged that the establishment of a fair pay agreement for adult social care in England is likely to “lead to increased labour costs for care providers” and that these costs are likely to be passed on to those that pay for such care – whether local authorities, the NHS, or individual private-pay recipients of care. It has set aside £500 million of public funds to give to local authorities in England to offset the additional costs they are likely to face.

“We would expect the cost of the fair pay agreement in ASC to feed through to higher costs for local authorities’ commissioning services and for self-funders,” the government said in an impact assessment dated October 2024. “Increased costs to local authorities could in turn create increased costs to the Exchequer. The extent of this, and how the costs are shared, depends on policy design and the outcome of negotiations, taking into account the objective of affordability for businesses, local authorities and self-funders. Some of this funding could be offset by increased tax receipts, as well as savings to the NHS.” An updated impact assessment is expected soon to sit alongside the consultation.

The ASC Negotiating Body for England is expected to be established by autumn 2027, with the first fair pay agreement expected to be in place by April 2028.

Townley said the agreement could serve as a template form of collective bargaining for other sectors, so she encouraged employers across other sectors to monitor developments closely.

Townley said: “Employers may face more structured negotiations and greater scrutiny from unions, especially in relation to pay equity and working conditions. Employers will be legally bound to comply with the terms of the fair pay agreement once implemented. Non-compliance could lead to tribunal claims, reputational damage, and regulatory penalties.”

Hollands added: “The fair pay agreement could include higher minimum pay rates, enhanced training obligations and career development pathways, all of which could increase operational costs. Employers in the sector will need to review and potentially revise employment contracts, policies and payroll systems to ensure compliance.”

“The proposals aim to make the sector more attractive for workers which, given the labour shortage in the sector and the difficulty in securing vias for foreign care workers, could help with recruitment and retention but also increase competition for talent. Employers may need to audit current workforce structures, especially where agency or umbrella models are used, to understand where responsibilities lie,” he said.