Care providers know the rate attached to a placement, visit or support package.

A residential home may receive a weekly fee.

A home-care provider may invoice for each contact hour.

A supported-living organisation may be paid for an agreed number of individual and shared hours.

A specialist provider may receive an enhanced rate intended to reflect complex needs.

Those figures are visible.

They appear in contracts, remittance advice, invoices and management reports.

But the rate tells the provider only what it receives.

It does not, by itself, reveal what the care costs to deliver.

Behind every funded bed, hour and package sits a much larger operating structure:

• the person delivering the care;
• the manager supporting that person;
• the recruitment required to put them there;
• the time spent travelling, training and recording;
• the property or office from which the service operates;
• the systems keeping information secure;
• the quality assurance required to maintain standards;
• and the financial resilience needed to make sure the service is still available next month and next year.

This is the difference between a fee rate and the cost-to-serve.

The government reported an average local-authority home-care fee of £25.05 per contact hour for 2025/26. Average weekly fees were £956 for residential care without nursing and £1,089 for nursing care for people aged 65 and over, excluding NHS-funded nursing care. Supported-living fees averaged £22.95 per contact hour. These are national weighted averages rather than conclusions about the sustainability of individual services.

The question providers must now answer is not simply:

What rate are we being paid?

It is:

What does it cost us to deliver the care safely, consistently and sustainably—and what remains after that complete cost has been met?

A Fee Is a Price. Cost-to-Serve Is the Operating Reality

The fee rate is an income measure.

Cost-to-serve is a delivery measure.

It brings together all the resources required to fulfil the care attached to that income.

A useful high-level model is:

**Direct care cost

• employment on-costs
• paid non-delivery time
• service operating cost
• management and quality
• property and infrastructure
• organisational overhead
• contingency and reinvestment
  = true cost-to-serve**

The formula is straightforward.

Producing an accurate answer is not.

Costs must be:

• allocated to the correct service;
• based on realistic activity;
• updated as needs change;
• and tested against the way care is actually delivered.

A model based on perfect occupancy, no sickness, no travel delay, no failed recruitment and no unexpected repair may produce an attractive cost.

It will not produce a credible one.

Why the National Average Cannot Price an Individual Service

National fee reporting is useful because it shows the broad direction of public commissioning.

It cannot explain the specific economics of:

• a rural home-care branch;
• a small dementia home;
• a large nursing service;
• a specialist learning-disability package;
• or supported living across several dispersed properties.

The same headline rate may need to fund very different operating conditions.

Geography changes cost

A home-care provider operating in a compact urban area may deliver several visits with limited travel.

A rural provider may pay employees for significant travel between isolated locations while recovering income only for the time spent inside each person’s home.

Property changes cost

One care home may own an energy-efficient modern building.

Another may occupy an older leased property requiring high energy expenditure, extensive maintenance and continuing capital investment.

Workforce markets change cost

A provider in an area with strong competition from the NHS, retail, logistics or hospitality may need to pay above the local care-sector average simply to recruit reliably.

Needs change cost

Two occupied rooms are not necessarily financially equivalent.

One person may require routine residential support.

Another may need:

• enhanced observation;
• two employees for transfers;
• intensive medicines support;
• specialist equipment;
• frequent health appointments;
• and significant night intervention.

A single average fee cannot capture every variation.

Providers need their own evidence.

The Eight Cost Layers Behind Care

1. Direct Pay

Direct pay includes the wages and salaries of the employees delivering care.

This is the most visible workforce cost.

From April 2026, the National Living Wage for workers aged 21 and over increased to £12.71 per hour. Skills for Care estimated that around 640,000 independent-sector adult social care posts were paid below that incoming rate in December 2025.

But direct pay is not limited to the standard daytime rate.

Providers may also need to fund:

• nights;
• weekends;
• bank holidays;
• sleep-ins;
• on-call arrangements;
• overtime;
• specialist responsibilities;
• qualification premiums;
• and leadership differentials.

A credible cost model must reflect the real pay structure rather than one representative hourly figure.

2. Employer On-Costs

The cost of employing someone extends beyond their gross pay.

It can include:

• employer National Insurance;
• pension contributions;
• paid annual leave;
• statutory or contractual sickness;
• parental leave;
• recruitment;
• occupational health;
• uniforms;
• background checks;
• and employee-support arrangements.

These costs may not appear beside every delivered care hour, but each hour must contribute towards paying them.

The government’s 2025/26 market-sustainability guidance specifically said local-authority fee setting should take account of actual costs, including the National Living Wage, employer National Insurance and wider inflationary pressures. It also recognised that reasonable fee levels should support statutory obligations, training and a reasonable rate of return sufficient to sustain efficient providers.

The provider should therefore avoid describing the difference between the care fee and the employee’s basic hourly pay as surplus.

Most of that difference already has a job.

3. Paid Time That Cannot Be Invoiced Directly

This is particularly important in home care and supported living.

Employees may need to be paid for:

• travelling between visits;
• waiting between calls;
• attending handovers;
• completing training;
• receiving supervision;
• joining team meetings;
• collecting equipment;
• reporting incidents;
• and completing essential administration.

Some of this time may be incorporated into a commissioned rate.

Some may not.

The Homecare Association’s 2026/27 minimum-price model places the cost of a legally compliant home-care service at £34.42 per hour. Its calculation includes the National Living Wage, travel time, mileage, waiting time, wage-related on-costs and a minimum contribution towards running a compliant care business.

The £34.42 model and the government’s £25.05 local-authority average are not identical measures and should not be treated as a direct universal price comparison.

But placed alongside one another, they demonstrate why a contact-hour fee can give an incomplete impression of the cost surrounding that hour.

The employee’s working day is larger than the billable care contact.

4. Workforce Resilience

A service needs enough staffing capacity to operate when ordinary disruption occurs.

That includes:

• holidays;
• sickness;
• mandatory training;
• vacancies;
• compassionate leave;
• supervision;
• and unexpected increases in demand.

A model based only on the hours employees are physically delivering care will understate the resources required.

Providers may need:

• bank staff;
• additional contracted capacity;
• overtime;
• agency workers;
• management cover;
• or a planned staffing buffer.

This is not necessarily inefficiency.

It can be the capacity that prevents one absence becoming a missed visit, unsafe shift or exhausted manager.

Regulation 18 requires providers to deploy enough suitably qualified, competent and experienced staff and to provide appropriate support, training, supervision and professional development. Those requirements create genuine costs that must sit within the care model.

5. Direct Service-Delivery Costs

Some costs sit close to the individual care activity.

Depending on the service, these may include:

• food and drink;
• clinical consumables;
• continence products;
• personal protective equipment;
• activities;
• transport;
• laundry;
• cleaning;
• medicines-support equipment;
• mobility equipment;
• and specialist professional input.

These should not all be treated as generic overhead.

Some people and services consume significantly more direct resource than others.

Where the cost changes materially, the care package and fee may require review.

6. Property, Equipment and Infrastructure

Care requires a safe physical and digital environment.

Property-related costs may include:

• rent;
• mortgage or financing;
• business rates;
• utilities;
• water;
• maintenance;
• repairs;
• servicing;
• grounds;
• security;
• fire systems;
• lifts;
• furniture;
• insurance;
• and compliance checks.

Infrastructure also includes:

• broadband;
• mobile devices;
• care-record systems;
• eMAR;
• rostering;
• payroll;
• cybersecurity;
• backups;
• and telecoms.

These costs may not increase each time a new person is admitted.

They still need to be recovered across the realistic level of activity delivered.

A property cost divided by 40 registered beds will produce the wrong answer when only 34 beds are realistically available and occupied.

7. Management, Quality and Regulatory Assurance

Care does not become safe simply because frontline workers are present.

The service also needs:

• registered management;
• deputy and senior leadership;
• supervision;
• HR;
• payroll;
• recruitment;
• finance;
• quality assurance;
• audits;
• safeguarding support;
• complaints handling;
• data protection;
• regulatory administration;
• professional advice;
• and board or owner oversight.

These functions protect:

• consistency;
• compliance;
• staff support;
• learning;
• and continuity.

Reducing them may lower the immediate overhead.

It can also weaken the systems that identify risk before harm occurs.

Management and quality costs should be apportioned honestly rather than treated as expenditure occurring somewhere outside the care service.

8. Contingency, Capital and Reinvestment

The service needs financial capacity to deal with what cannot be predicted precisely.

That can include:

• equipment failure;
• urgent maintenance;
• voids;
• delayed payments;
• insurance excesses;
• temporary staffing;
• legal advice;
• cyber incidents;
• and unexpected changes in need.

It also needs to invest in:

• refurbishments;
• heating and energy efficiency;
• digital systems;
• vehicles;
• workforce development;
• environmental improvement;
• and future service capacity.

Government fair-cost guidance has previously defined a fair cost as one that allows efficient providers to cover care-delivery costs and achieve a reasonable profit, surplus or return that supports reinvestment and long-term sustainability.

A model that excludes reinvestment may explain how a service survives this month.

It does not explain how it remains fit to operate for the next five years.

What Does a Home-Care Hour Really Cost?

Home care exposes the difference between fee and cost particularly clearly.

A provider may invoice one hour of care.

But delivering that hour can require:

• recruitment and compliance checks;
• rota planning;
• employee travel;
• mileage;
• waiting time;
• mobile connectivity;
• electronic call monitoring;
• care recording;
• supervision;
• training;
• holiday and sickness cover;
• on-call management;
• payroll;
• quality assurance;
• and commissioner reporting.

Contact time is not the same as working time

Imagine a worker completes six hours of care contacts during an eight-hour working period.

The remaining time may involve:

• travel;
• parking;
• waiting;
• a gap that cannot be used productively;
• or required documentation.

The employee still has to be paid correctly for their working time.

The cost of that non-contact time must be recovered through the contact hours the provider can invoice.

Short visits create additional pressure

A series of 30-minute visits may produce more travel, handover and administrative time per invoiced hour than longer blocks of support.

A rate that appears workable for one-hour visits may become unsustainable when the same fee is applied across a fragmented round.

Cancellations and changes affect utilisation

A provider may have employees available and scheduled, but income may be lost through:

• hospital admission;
• late cancellation;
• a package being paused;
• a person not being at home;
• or commissioner changes.

The cost may remain even when the visit is not invoiced.

A more credible home-care calculation

The provider should divide the full cost of operating the branch by realistically billable contact hours, not by all paid workforce hours and not by the maximum hours theoretically available.

The model should also distinguish between:

• urban and rural rounds;
• short and long visits;
• standard and complex care;
• and weekday and unsocial-hour delivery.

One average branch rate may conceal several very different service economics.

What Does an Occupied Care-Home Bed Really Cost?

A weekly care-home fee needs to fund far more than the employee hours directly allocated to one resident.

The home must operate continuously.

That means covering:

• 24-hour staffing;
• waking nights or sleep-ins;
• management;
• catering;
• cleaning;
• laundry;
• maintenance;
• heating;
• lighting;
• water;
• communal areas;
• activities;
• insurance;
• compliance;
• and central support.

Registered capacity is not the correct denominator

A 50-bed home does not automatically have 50 revenue-producing beds.

Some rooms may be unavailable because of:

• refurbishment;
• maintenance;
• infection control;
• configuration;
• insufficient workforce capacity;
• or suitability for current referrals.

Others may be vacant between placements.

The realistic cost per occupied bed should therefore be based on sustainable occupancy—not theoretical maximum capacity.

The cost of one empty bed is not one weekly fee

Many costs do not fall when one room becomes empty.

The provider may not be able to reduce:

• night staffing;
• management;
• heating;
• insurance;
• kitchen staffing;
• or maintenance.

The lost income can therefore flow almost directly into reduced contribution.

Dependency changes the bed cost

Two residents paying the same rate may require very different resources.

One may require:

• two staff for transfers;
• frequent night intervention;
• enhanced observation;
• intensive medicines support;
• specialist dietary provision;
• or regular clinical coordination.

A single standard fee can conceal significant variation in cost.

A more credible bed calculation

Providers should calculate:

Total home operating cost
divided by realistic occupied bed weeks
adjusted for material dependency differences

They should also model the effect of:

• one fewer occupied bed;
• increased agency use;
• higher energy costs;
• and changes in resident dependency.

This reveals how sensitive the service is to relatively small operational movements.

What Does a Supported-Living Package Really Cost?

Supported living can appear simple when the contract states a defined number of hours.

In practice, the package may contain several different cost types:

• individual one-to-one support;
• shared staffing;
• sleep-ins or waking nights;
• on-call cover;
• travel;
• community activity;
• management;
• property coordination;
• and time spent working with families, landlords and professionals.

Shared hours need careful allocation

Where one worker supports several tenants, the provider needs a clear method for allocating:

• cost;
• responsibility;
• and any unused capacity.

A vacancy within the property may reduce income while the shared staffing arrangement remains necessary for the people still living there.

Individual hours may not reflect the complete workload

An agreed support package may not capture:

• appointments;
• hospital attendance;
• crisis support;
• safeguarding meetings;
• tenancy issues;
• or increased behaviour-related intervention.

Voids can affect more than rent

Where a service loses one placement, the effect may extend into:

• shared staffing;
• service-management allocation;
• transport;
• and the viability of the complete setting.

A more credible supported-living calculation

The provider should model:

• direct individual support;
• shared support;
• night arrangements;
• management;
• property-related responsibilities;
• and a reasonable share of organisational overhead.

The model should show what happens when:

• one person’s needs increase;
• one placement becomes vacant;
• or shared hours are reduced without the wider service being redesigned.

What Does a Specialist Support Package Really Cost?

Specialist care frequently requires capability that is not visible in a standard hourly rate.

That may include:

• enhanced staffing ratios;
• condition-specific learning;
• clinical oversight;
• behavioural support;
• assistive technology;
• specialist equipment;
• environmental adaptation;
• multidisciplinary meetings;
• and increased management supervision.

The package may also require a more selective recruitment process and longer induction before employees can work independently.

Competence has a cost

Specialist training is not only the course fee.

It includes:

• employee attendance;
• replacement cover;
• assessment;
• supervision;
• practice observation;
• and refresher activity.

Complexity may increase between formal reviews

If the person’s support need changes before the funding is reassessed, the provider may begin carrying additional cost immediately.

The service should record:

• what changed;
• when;
• which resources increased;
• and what evidence supports a package review.

A specialist package should be priced against the actual delivery model, not a general sector average.

The Cost-to-Serve Model

A useful provider model should operate at three levels.

Level 1: The individual unit

This might be:

• a bed week;
• a contact hour;
• a supported-living package;
• or a specialist placement.

Level 2: The service

This might be:

• one care home;
• one branch;
• one supported-living setting;
• or one region.

Level 3: The organisation

This includes:

• group management;
• governance;
• central finance;
• HR;
• technology;
• legal support;
• financing;
• and strategic investment.

The model should allow leaders to trace how organisational cost is allocated to the services that depend on it.

It should avoid two extremes.

Under-allocation

Central support is excluded, making individual services appear more profitable than they are.

Over-allocation

A struggling service receives a disproportionate share of central overhead and appears unviable for reasons unrelated to its operation.

The method should be:

• transparent;
• consistent;
• explainable;
• and reviewed periodically.

Use Realistic Activity, Not Perfect Activity

A cost model can be made to show almost any answer by changing the utilisation assumption.

Care homes

Do not assume:

• every registered room is available;
• occupancy will remain at 100%;
• and no admission gap will occur.

Home care

Do not assume:

• every paid minute is billable;
• every round is perfectly efficient;
• and every commissioned hour is delivered.

Supported living

Do not assume:

• no voids;
• no package changes;
• and all shared capacity remains fully funded.

Specialist care

Do not assume:

• no changes in dependency;
• no enhanced supervision;
• and no temporary increase in staffing.

A credible model should use:

• actual recent performance;
• a realistic sustainable target;
• and sensitivity testing.

Leaders should be able to see what happens if occupancy or delivered hours move by:

• 2%;
• 5%;
• or 10%.

Small changes can have a significant effect where fixed costs are high and margins are limited.

Separate Variable, Semi-Variable and Fixed Cost

This helps leaders understand what can genuinely change when activity changes.

Variable costs

These move relatively directly with delivery.

Examples may include:

• some food;
• mileage;
• consumables;
• and certain direct-care hours.

Semi-variable costs

These move, but not immediately or proportionately.

Examples may include:

• staffing;
• laundry;
• utilities;
• and agency.

One vacant bed may not allow the provider to remove one employee from every shift.

Fixed costs

These continue across the period regardless of short-term activity.

Examples may include:

• rent;
• core management;
• insurance;
• software contracts;
• and financing.

This distinction prevents leaders from assuming that lost income will be matched automatically by lower cost.

It also helps identify which services are most exposed to:

• occupancy changes;
• package loss;
• or cancelled hours.

Include Quality and Compliance in the Model

Quality is not something providers fund after every other cost has been covered.

It is built into the service.

The model should include sufficient resource for:

• staffing;
• training;
• supervision;
• care planning;
• audits;
• safeguarding;
• complaints;
• incident learning;
• policy support;
• and regulatory administration.

CQC’s staffing regulation requires appropriate training, supervision, appraisal and professional development in addition to sufficient staffing.

A rate that funds the visible care interaction but excludes the systems making that interaction safe is not a complete rate.

Build Reinvestment into the Cost—Do Not Hope It Appears

Providers often treat capital investment as something that will be funded if the year ends well.

That approach creates delayed maintenance and ageing infrastructure.

The cost model should identify recurring provision for:

• room refurbishment;
• replacement equipment;
• heating and boilers;
• vehicles;
• digital devices;
• software migration;
• cyber resilience;
• energy efficiency;
• and building adaptations.

Not every cost will occur annually.

The need to fund them does.

A service that prices only for today’s consumption is gradually using up its future.

What Should Commissioners Expect from Providers?

A strong cost-to-serve model should create a more constructive commissioning conversation.

Providers should be able to explain:

• the delivery assumptions;
• workforce structure;
• pay and on-costs;
• occupancy or utilisation;
• dependency;
• direct expenditure;
• overhead allocation;
• and required reinvestment.

Commissioners should be able to understand:

• which costs are service-specific;
• which are organisation-wide;
• what has changed;
• and what outcome the requested rate supports.

The 2025/26 MSIF guidance encouraged local authorities to consider actual local costs, workforce pay, travel time in domiciliary care and the need for sustainable fee increases.

The aim should not be to turn fee negotiation into a competition over whose spreadsheet is accepted.

It should be to establish a shared evidence base about what safe delivery requires.

Common Cost-Modelling Errors

Treating wages as the complete employment cost

This excludes employer obligations and workforce-support infrastructure.

Dividing by theoretical maximum capacity

Registered beds and commissioned hours are not always available or deliverable.

Ignoring non-contact time

Travel, waiting, training and supervision remain part of the working model.

Averaging away complexity

A service average can conceal packages that are materially underfunded.

Excluding management and quality

This makes the service appear cheaper by removing the systems keeping it safe.

Using historic costs without current contracts

Utilities, insurance, software and maintenance may have moved significantly.

Assuming all overhead can fall quickly

Many costs remain fixed when income declines.

Excluding reinvestment

This models short-term survival rather than sustainability.

Treating every provider service identically

Care homes, home care, supported living and specialist services require different cost drivers.

Failing to reconcile model with cash

A service can appear viable on an accrual basis while delayed payments create serious working-capital pressure.

The Cost-to-Serve Dashboard

Provider leaders should receive a service-level view containing:

Income

• current rate;
• funding source;
• invoiced units;
• delivered units;
• enhancements;
• and unpaid amounts.

Workforce

• direct pay;
• on-costs;
• agency;
• overtime;
• sickness;
• training;
• supervision;
• and management cover.

Utilisation

• occupancy;
• available beds;
• delivered contact hours;
• cancellations;
• voids;
• and package utilisation.

Service costs

• food;
• consumables;
• utilities;
• travel;
• maintenance;
• technology;
• insurance;
• and property.

Quality and infrastructure

• management;
• audits;
• HR;
• finance;
• regulatory support;
• and professional advice.

Sustainability

• service contribution;
• reinvestment requirement;
• cash collection;
• and sensitivity to changes in activity or cost.

The objective is not to place more figures in front of managers.

It is to give them a clear answer to:

Which services are sustainable, which require action and why?

What Should Providers Expect from Cost and Finance Partners?

There is a legitimate role for organisations providing:

• cost-of-care modelling;
• accountancy;
• management information;
• payroll;
• workforce analytics;
• pricing support;
• commissioner negotiation;
• commercial finance;
• and business intelligence.

A credible partner should be able to explain:

• which data is required;
• which assumptions are being used;
• how overhead is allocated;
• how service differences are recognised;
• how the model links to actual accounts;
• and what decision the analysis will support.

Useful outcomes may include:

• identifying underfunded packages;
• creating service-level visibility;
• strengthening commissioner evidence;
• improving pricing;
• modelling pay changes;
• assessing expansion;
• and deciding whether a new contract is deliverable.

The result should not be an elaborate model that only the consultant understands.

Provider leaders need to be able to maintain, explain and use it.

A Practical 30-Day Cost-to-Serve Review

Week 1: Select the unit

Choose one:

• care home;
• home-care branch;
• supported-living setting;
• or high-value support package.

Define the unit being costed:

• occupied bed week;
• billable contact hour;
• or complete support package.

Week 2: Capture the complete cost

Bring together:

• payroll;
• rota;
• agency;
• invoices;
• property;
• utilities;
• technology;
• management;
• quality;
• and professional expenditure.

Identify any missing or estimated figures.

Week 3: Test activity assumptions

Compare:

• registered capacity with available capacity;
• commissioned hours with delivered hours;
• paid time with billable time;
• and planned occupancy with actual occupancy.

Run at least three scenarios:

• current performance;
• sustainable target;
• adverse movement.

Week 4: Agree action

Decide whether the service needs:

• a fee review;
• package reassessment;
• occupancy action;
• workforce improvement;
• contract review;
• better billing;
• or operational redesign.

Every action should have:

• an owner;
• deadline;
• expected financial effect;
• and quality safeguard.

Ten Questions Care Leaders Should Be Asking

1. What does every occupied bed, contact hour and package actually cost?
2. Are we including the complete employment cost rather than basic wages alone?
3. How much paid time cannot be invoiced directly?
4. Are we dividing cost by realistic utilisation?
5. Which packages have become more complex without a corresponding rate review?
6. Are management, quality and technology allocated properly?
7. What provision exists for capital replacement and reinvestment?
8. Which service is most sensitive to a small occupancy or volume change?
9. Can we explain our cost model clearly to commissioners and staff?
10. Which care or continuity risk emerges if the current rate continues?

The final question keeps financial modelling connected to its real purpose.

What Does a Strong Cost-to-Serve Model Look Like?

It is:

Complete
It captures the resources genuinely required to deliver care.

Service-specific
It reflects the operating model rather than relying only on national averages.

Realistic
It uses achievable occupancy and deliverable hours.

Current
It reflects present pay, contracts and care complexity.

Transparent
Leaders can explain the assumptions and allocation method.

Sensitive
It shows what happens when cost or activity changes.

Quality-protected
It does not produce a cheaper rate by removing necessary care infrastructure.

Reinvestment-aware
It provides for future equipment, buildings, technology and workforce development.

Actionable
It supports pricing, negotiation and operational decisions.

That is what turns financial information into provider intelligence.

A Fee Only Tells Half the Story

The adult social care system often discusses rates as though the rate itself explains the financial position.

It does not.

A fee tells us what somebody is paying.

It does not tell us:

• how much paid time surrounds the care;
• what the workforce costs to employ properly;
• how much management is required;
• whether the property remains suitable;
• what quality assurance costs;
• what risk is being carried;
• or what investment will be needed next year.

A £25 contact-hour fee, a £956 residential week and a £22.95 supported-living hour describe income categories.

They do not describe the complete service behind them.

Providers need to move beyond comparing their rate with the previous year or the provider down the road.

They need to understand their own cost-to-serve.

That clarity creates better decisions.

It allows leaders to identify:

• which work is sustainable;
• where complexity has changed;
• what needs to be reviewed;
• which operational pressure is avoidable;
• and where the funding simply does not reflect the care required.

It also creates a more honest conversation with commissioners.

The issue is not whether providers can produce the lowest possible theoretical cost.

It is whether the agreed rate enables a capable organisation to deliver:

• safe care;
• fair employment;
• effective management;
• suitable infrastructure;
• and continuity over time.

Every bed has a cost.

Every care hour has a wider workforce around it.

Every support package carries risk, responsibility and infrastructure.

When those costs remain invisible, providers absorb them until the service begins to weaken.

When they become visible, leaders can act before financial pressure becomes a care crisis.

That is why the journey from fee rate to cost-to-serve matters.

The fee is the starting figure.

The true cost is the complete story.

Frequently Asked Questions

What is cost-to-serve in adult social care?

Cost-to-serve is the complete cost of delivering a bed, care hour or support package. It includes direct wages, employer on-costs, non-contact time, management, property, technology, quality assurance, contingency and reinvestment.

What was the average local-authority home-care fee in 2025/26?

The provisional England weighted average was £25.05 per contact hour, representing a 5.3% increase from 2024/25. This is a national average and not a judgement that the rate is sufficient for every service.

What is the Homecare Association’s 2026/27 minimum price?

The association calculated a minimum price of £34.42 per hour. Its model includes the National Living Wage, travel, mileage, waiting time, wage-related on-costs and a minimum contribution towards running a compliant care business.

Why is an employee’s hourly wage lower than the cost of a care hour?

The provider must also pay employment on-costs and fund travel, training, supervision, management, technology, insurance, quality assurance and other operating requirements.

How should a care home calculate cost per bed?

It should divide the complete operating cost by realistic occupied bed weeks, not registered capacity, and adjust for material differences in dependency and staffing need.

How should a home-care provider calculate hourly cost?

It should divide the complete branch cost by realistically billable contact hours and include paid travel, waiting, training, supervision, cancellations and other non-contact time.

Should profit or surplus be included?

A sustainable model should include a reasonable return or surplus that supports contingency, capital replacement and reinvestment. Government fair-cost guidance recognises this as part of long-term provider sustainability.

What should providers do when a package becomes more complex?

They should document the change in need, identify the additional resources required, calculate the resulting cost and seek an early package or fee review.

Editorial sources

This feature has been developed using evidence available by 29 June 2026, preserving the integrity of its backdated publication position.

• Department of Health and Social Care, Market Sustainability and Improvement Fund: Provider Fee Reporting 2025 to 2026.
• Department of Health and Social Care, Market Sustainability and Improvement Fund 2025 to 2026: Main Guidance.
• Skills for Care, Pay in the Adult Social Care Sector in England as at December 2025.
• Low Pay Commission, The National Minimum Wage in 2026.
• Homecare Association, Minimum Price for Homecare 2026/27.
• Care Quality Commission, Regulation 18: Staffing.
• Department of Health and Social Care, Market Sustainability and Fair Cost of Care Fund Guidance

Author: CSN Editor