The social care sector is facing a perfect storm of financial pressures, rising workforce costs, and increasing legal obligations. 

At the recent Care England conference, my colleague Hannah Bollard and I led a workshop titled ‘People Strategy on a Restricted Budget: Leadership, Risk & Legal Realities’. The session was aimed at CEOs and executive leaders, offering strategic insights into managing these challenges while sustaining high-quality care.

We asked attendees to imagine a scenario - 12 months from now, their organisation has successfully navigated financial constraints, workforce planning, and regulatory compliance, emerging stable and thriving. 

The question then was: How do you get there? 

Here are some key takeaways from our session:

1. The rising cost pressures and funding strategies
The financial outlook for the sector is concerning. The 2025-26 budget projections highlight significant wage increases driven by National Minimum Wage (NMW) reforms, higher National Insurance contributions, and statutory sick pay obligations from day one. With no corresponding funding increase, the sector faces an estimated £2.8 billion rise in costs.

To counter this, care providers must adopt a robust funding strategy, including:

• Fee negotiations: Engaging with local authorities using clear data to push for realistic fee uplifts. The recent Stoke-on-Trent City Council judicial review underscores the importance of presenting a compelling financial case.
• Sector-wide advocacy: Collective pressure on funders to ensure financial sustainability, particularly in light of devolution changes affecting local authority funding structures.
• Contingency planning: Preparing for worst-case scenarios if funding does not increase, ensuring workforce and service stability.

2. Rethinking workforce models
Workforce costs and instability remain significant challenges. Providers must strategically reassess workforce structures rather than resorting to reactive cost-cutting measures. Some workforce models worth exploring include:

• Annualised hours contracts: Smoothing out pay while ensuring staff availability at peak times.
• In-house bank staff: Reducing dependency on expensive agency workers.
• Zero-hour contracts: While offering flexibility, these may face increased regulatory scrutiny.
• Apprenticeships & overseas recruitment: Addressing staff shortages but requiring investment in retention strategies.
• Shared staffing models: Collaboration between providers to optimise workforce allocation.

Every model has trade-offs, and the key is finding a balance between cost efficiency and long-term workforce sustainability.

3. Strategic workforce adjustments: Beyond cost-cutting
While reducing headcount or adjusting terms & conditions is often seen as a last resort, a proactive approach can yield positive results:

• Restructuring: Aligning roles and consolidating teams to improve operational efficiency.
• T&Cs adjustments: Reviewing benefits, allowances, and work patterns to optimise costs while maintaining staff morale.
• TUPE Transfers: Whether acquiring or losing contracts, strategic TUPE planning can turn legal obligations into opportunities for workforce retention and service improvements.

4. Employment law changes: Preparing for the future
The Employment Rights Bill introduces fundamental changes that will impact care sector employers, including:

• Day-one unfair dismissal rights: Employers will need structured probation management, as dismissal risks increase from the first day of employment.
• Extended tribunal time limits: Employees will have six months instead of three to bring claims, leading to more employment disputes, and therefore there is a need for clarity about how providers manage claims.
• Duty to offer guaranteed hours: Zero-hour contract workers will need to be offered fixed-hour contracts based on their working patterns.
• Sector-wide fair pay negotiations: The Adult Social Care Negotiating Body will introduce binding pay agreements, raising further funding challenges.

Now is the time for leaders to reassess policies, train management teams, and strengthen employment dispute resolution processes to prepare for the above. 

5. The leadership mindset: Proactive, not reactive
A key message from our session was that workforce strategy should not be driven by crisis management. Instead, leaders must proactively:

• Engage HR teams in forward planning.
• Train managers to navigate employment risks effectively.
• Take strategic, data-driven approaches to funding, staffing, and employment law compliance.

Final thoughts: Immediate actions
As we emphasised during our workshop, every leader should leave with concrete actions to implement immediately. Whether it’s revisiting workforce structures, strengthening employment policies, or engaging in fee negotiations, proactive leadership is essential to ensuring sustainability in the face of financial and legal challenges.

On 2 April, we are running our annual health and social care employment law update, during which we will explore in more detail the following: 

• Managing workforce changes and financial pressures, including avoiding legal pitfalls when changing roles, terms and conditions, handling restructures and managing service transfers (TUPE).
• Future employment law changes including how best to prepare. We will also discuss the Employment Rights Bill and key legal risks for social care employers.
• The legal duty to prevent sexual harassment and how HR teams can comply with the law and mitigate risks in social care settings.

In the meantime, if you would like to discuss how these issues impact your organisation, or if you need strategic guidance on employment law and workforce management, please feel free to contact us.