NHS services are to be exempt but care homes, hospices and GPs are not.
The Scottish Care sector has raised concerns about plans by the Labour Government to increase employer National Insurance (NI) contributions.
The 2024 UK Autumn Budget announced on 30 October by Chancellor Rachel Reeves includes a 1.2% increase in employer National Insurance contributions, bringing the rate to 15%.
The threshold at which employers start paying National Insurance will also be reduced from £9,100 to £5,000 per employee.
This is likely to increase costs for all businesses, but especially social care providers whose staffing costs are usually between 80 to 90 per cent of overall costs. The National Insurance change applies to all employers in Scotland.
A survey conducted by Scottish Care between November 5 and 14 of its members found the average wage cost increase as a result of the changes across respondents was 4.67%.
The average increase to employer NI contributions was 39.54%, with respondents noting a cost of between £19,800 and £15,500,000 per social care employer as a result of the National Insurance changes, dependent on the size of organisation and number of employees.
A further 97.83% of respondents said these changes make their organisation less sustainable, with nearly half (48%) note the very real possibility of service closure as a result of this increase.
Scottish Care said the failure to recognise and account for the impacts of these changes on social care organisations raises further concerns about the lack of value placed on social care and awareness of the perilous sustainability of the sector.
The changes to National Insurance rates and thresholds announced in the UK Budget will create additional financial burdens on independent care providers and further strain already tight operating margins, the group said.
Alongside the changes in the National Minimum Wage, care bodies warned these increases are going to have a huge impact on the ability of social care services to remain sustainable and to survive.
NHS services are to be exempt but care homes, hospices and GPs are going to fall foul of this increase, which Scottish Care said is wholly inequitable.
They said the affordability of National Insurance increases in the social care sector must be recognised and the sector exempted, or significant increased funding ringfenced to support its implementation.
The Scottish Government will announce its own Budget setting out its tax and spend plans on 4 December 2024.
Dr Donald Macaskill, CEO of Scottish Care, said: “These additional pressures on social care providers created by the UK Budget announcement are unworkable in the current climate and a solution, either through exemption or funding, must be found in order for the social care sector to be sustained.
“Scottish Care is incredibly alarmed at the figures presented in our survey, not least around service closures, with many providers indicating that this may very well be the straw that breaks the camel’s back.
“It is no exaggeration to say we will lose swathes of social care provision in Scotland unless urgent, practical and resource-based solutions are progressed for the sector. If not, the impact on individuals, communities and public services will be catastrophic.”
