Paying for Care

Starting a care service with limited resources is like dealing with a chicken-and-egg problem. You need both care workers and people who need care to get started, but you can't get one without the other; which comes first?

Paying for Care

Learning from the LOTI Pilot in Clapton, Hackney.

A Chicken and Egg Situation

Starting a care service with limited resources is like dealing with a chicken-and-egg problem. You need both care workers and people who need care to get started, but you can't get one without the other; which comes first? We don't have the resources to hire a big team or to promise contracts to care workers right away, so we have to start small and grow slowly. We cannot guarantee care workers will always have enough hours to work. Likewise, we cannot guarantee that people who need care will always have a complete team of workers who can meet all their needs.

Building a team in the LOTI project means managing expectations and reminding everyone that we are growing slowly. Both care workers and care receivers need to be willing to take a chance on us, even though they know that things might not always be perfect. Six months into the project, we have found some people who are willing to take this journey with us. These people already have care budgets from the council. However, it is not always straightforward to use these budgets to buy care from Equal Care Coop. It depends on the type of budget they have.

Care budgets can be allocated in four main ways:

  • Council-commissioned care
  • Direct payments
  • Direct payments with support.
  • Individual service fund

The team-building process in the LOTI project and the growth of Equal Care Coop depends a lot on how the local authority manages, administers, and funds social care in the borough. Local authorities have common processes like assessing needs and determining care options. They also arrange, monitor, and review care delivery. However, there are differences in how these processes are administered and funded. These differences are significant enough that some people refer to the postcode lottery of social care. To understand team building and growth strategy, we must understand this landscape. In this blog, I provide a short overview of this landscape. I also identify the options we have in Hackney. Additionally, I highlight the challenges and opportunities they bring.

The Funding Landscape in Social Care

Council Commissioned Care

The council uses your notional budget to commission a care provider on your behalf. In this case, you have limited options for your care because the local authority selects providers from their own list. Local authorities frequently use theoretical budgets to purchase care services from well-established providers. Typically, these organizations are larger and cover more areas. They also offer a wider range of services and often partner with multiple local authorities. This allows them to provide care to a large number of clients and serve diverse communities. They can negotiate contracts with local authorities to secure regular funding. This also allows them to negotiate favourable rates for their services. This financial stability can translate into more predictable costs for commissioners. 

Direct payments 

These are personal budgets that individuals use to buy care themselves. The roots of direct payments in the UK can be traced back to the 1980s, when a grassroots movement of disabled people began advocating for greater control over their own care arrangements. This movement gained momentum in the 1990s, leading to the introduction of the Community Care (Direct Payments) Act in 1996. Disabled individuals now have the right to receive cash payments. This means they can use this money to buy their own care and they are no longer dependent on traditional care services from local authorities.

Direct payments allow you to hire your own personal assistant or care worker. You can also use self-employed workers or choose an agency. Direct payments allow you to have more control over your care. However, they also require you to take on more responsibility for managing your own care and support budget. This can include:

  • Determining your care needs and developing your care plan
  • Finding and selecting care providers
  • Negotiating contracts with care providers
  • Paying care providers
  • Managing your records
  • Monitoring the quality of the care you receive

The amount of labour involved in managing a direct payment will vary depending on your needs and preferences. Some people may find it straightforward, while others may need more support. You can ask someone else, such as a friend or relative to look after your direct payment for you. Several organizations offer free, unbiased advice to direct payment users.

Direct Payments + Support. 

Direct payments users can access a variety of organisations and services to help them use direct payments effectively. A variety of organizations can provide these services. These organizations include Direct Payment Support Services, Independent Living Advisers, Recruitment Agencies, Online Platforms, Personal Assistant Networks, PA Employment Support Services, PA Training and Development Providers, and Payroll Services. 

Individual Service Funds (ISFs)

ISFs offer a midpoint between a Direct Payment and a directly commissioned service. Choosing an ISF has a benefit. It offers an alternative route to having greater choice and control. You don't have to take on the responsibility of a Direct Payment. The council gives money to a third-party organization. The organization can provide care or buy care from other providers for you. You will usually have a say in how to spend the money. 

In addition to these four options, there is a fifth option for people who need social care but are not eligible for council-funded care: 


Local authorities assess both your care needs and financial situation. This includes a review of your income, capital, savings, investments, and property ownership. You may qualify for a care package if your capital falls below a certain amount. In some cases, the local authority may cover all your care costs. If your capital is above the threshold, you might qualify for a means-tested care package. In these cases, the local authority helps pay for some of your care expenses. You are responsible for paying the rest. The extent of care you receive depends on both your care needs and the funds available for payment.

Equal Care Coop Clapton aims to be a service accessible to everyone. This includes people in Hackney, regardless of their funding source. Being able to operate on the rates offered is important. Rates come from self-funders, Direct Payments, ISFs, and Council-commissioned care. Local authorities have their own policies, procedures, and market rates. Often, care agencies typically charge higher rates than individuals paid directly. This is due to higher operational overheads for agencies. 

The council in some local authorities will change payment rates, adding extra funds for people who use agencies. In other local authorities, a person using direct payments to buy care from an agency is expected to cover the gap. This creates a postcode lottery in social care, where people's access to quality care can vary depending on where they live. 

These differences in local authority rates can affect the growth and financial viability of small to medium-sized care providers. The revenue margins for home care are very narrow. This means that for an organisation of our size, it may be workable for a care provider to work in Hackney, but not Islington. 

Funding & Growing in Hackney

Equal Care Co-op is always working to improve its financial position. It is also developing its infrastructure and gaining experience. The goal is to become eligible for council contracts outside of Calderdale, where we first started our service. However, the Clapton Care Circle in Hackney is currently unable to pursue all the options for delivering home care services. Securing council contracts for commissioned care requires meeting certain requirements. These requirements cover finances, operations, and structure. Providers must show a strong financial position. This includes a stable revenue model, healthy cash reserves, and positive cash flow. To provide sustainable care, they need a solid infrastructure in place. This includes policy frameworks, qualified management, and necessary facilities. Providers design these requirements to ensure their financial stability, necessary resources, and ability to deliver high-quality care to vulnerable individuals. As a small startup with limited resources, Equal Care Hackney cannot meet these criteria. Hackney Council contracts are unavailable, so Equal Care has to focus on self-funded or direct payment care in Clapton. 

In Hackney, about 700 people receive direct payments for adult social care. This is only about 14% of all recipients in Hackney. Several factors contribute to the low uptake of direct payments in Hackney:

Lack of awareness: Many people are not aware that direct payments are an option for them. Many of the residents of Clapton that we have engaged in and through our team-building process were unaware of direct payments. 

Lack of support: People often face challenges managing their payments and finding care providers. Hackney Council does not currently offer the option of using an Individual Service Fund Holder. This can mean social workers feel conflicted when care recipients are reluctant to fully manage their own care and support. Furthermore, direct payments user-led groups lack a peer support network. They have no one to seek advice and guidance from. 

Low rates: The standard direct payments rate offered by Hackney Council is £14.88 per hour, which is significantly lower than the market rate for care work. Furthermore, with the rises in the London Living Wage, it is no longer enough to pay a living wage in Lonon. The low rates offered by local authorities for direct payments are a major barrier to the recruitment of personal assistants. A recent survey by Think Personal Act Local found that 68% of respondents considered this issue the greatest barrier to successful recruitment. 

Given the reliance of Equal Care Coop on direct payments as a pathway to growth, these factors are significant determinants of success for our organisation. The standard direct payments rate offered by Hackney Council of £14.88 per hour would have stopped our project in its tracks. Thankfully, Hackney Council helped us overcome this barrier by agreeing to pay us an increased agency rate of £19 per hour. 

Whilst this makes a significant difference to our prospects for growth in Hackney, this rate alone will not cover the full cost of the service. 

Our current business model allocates 80% of our fees to self-employed care workers. We keep 20% as a Cooperative Contribution for operational costs. Our Self-employed Care workers in London set their rates somewhere between £16.50-£20.50 per hour. These hourly rates recognise that care workers need to pay their own National Insurance and income tax. They also need to make pension contributions and account for holiday and sick pay. Self-employed workers must invest significant time and labour outside their billable hours. This includes training, travel, and administration. 

To ensure fair rates for self-employed workers, we need to charge between £20.50- £25.50 per hour. This will also generate revenue that promotes future employment opportunities. This leaves a deficit of between £1.50 and £6 per hour which team owners (the persons receiving care and support) have to pay.  For someone receiving 20 hrs of care per week, this would mean a weekly payment of £30 to £120 a week. For many people we have engaged with, this is a significant added expense in the current cost of living crisis. Relying on top-ups from individuals already assessed by the council as unable to fund their care is not a strong business model. 

Surviving The Care Market 

We are committed to providing an accessible service to those in need. We are also committed to giving care and support workers fair pay and quality work. We know that many agencies inflate their advertised hourly rate for employed staff by adding holiday pay (that should be separate) and by excluding travel time. In Equal Care, employed workers receive our full advertised salary. They also get 30 days of holiday per year. In addition, they have a pension and access to sick pay. Lastly, they are paid for all their working hours, including support, travel, and training. 

Many agencies overload care workers' schedules, leaving insufficient time to travel between visits. In contrast, Equal Care workers have the power to choose who they support. They also control their schedule to achieve work-life balance. 

Finally, we acknowledge that current market rates have increased reliance on migrant workers for UK care providers. According to the Home Office, 30,852 migrant workers have entered the UK under the care worker visa in the last year (2021-22). A large amount of care and support is given by black and Asian women. Our partnership with the Pan-African Workers Association has allowed us to gain a greater understanding of their vulnerability. It has also highlighted the extent of their exploitation by their employers (see This issue is particularly pertinent in Hackney, where 41% of care and support workers are from racial minorities.  

The cynical strategies many home care providers use to cut costs can make for more sustainable or profitable services. But they can also produce the high levels of staff burnout and extremely low staff retention levels we see in the sector. This affects the quality of care and support that workers can give.

Our rates are not influenced by offering premium or upmarket care. These rates are the bare minimum needed to ensure quality care and resilient caregiving relationships. Sustaining rates that secure quality jobs for care workers is key to reversing the 'race to the bottom' we see in social care. The Fair Cost of Care (FCC) is a recent government initiative. It supported local authorities in developing market sustainability plans. These plans are based on the true costs of delivering care in their areas. These reports set out the fair costs of care in terms of lower, median and upper quartile rates. 

The FCC's findings are not legally binding for Local Authorities though. Nor is it backed up with any pledges to increase central funding for social care. To achieve the rates published in Hackney Council's FCC report, additional government funding is needed. The vision of a more fair and sustainable market also highlights the significant fiscal deficit local authorities like Hackney need to overcome to realise this vision. Whilst this funding gap remains, Equal Care Coop must find ways of adapting to current market conditions without compromising on its commitment to securing sustainable livelihoods to workers and providing genuine relationship-centred care.