Caps on agency social worker pay ‘saving millions’, councils say

Recruitment market is beginning to stabilise, according to regional lead officers – but challenges remain

By Alex Turner on February 1, 2017 in Workforce

Agreements to cap pay for agency social workers are saving councils millions of pounds, regional lead officers have told Community Care.

Pay caps are estimated to be reducing agency spend by £10 million annually in the West Midlands, while in the East of England the projected figure is £6.4 million. The memorandums of co-operation between councils of which caps form one element may also, according to some local authority representatives, be contributing to a “less volatile” social work recruitment marketplace.

But other factors, most notably tax changes that will bring agency and permanent workers’ earnings closer into line, are also playing their part in this picture – and agencies say there’s “no data” as yet to suggest an overall drop in demand for locums. Meanwhile localised pressures mean some councils are better equipped than others to stay within the agreements – and are in some cases having to be granted temporary exemptions from the caps in order to keep the memorandums functioning for the long-term.

Taming the marketplace

Memorandums of co-operation have been introduced gradually across England since 2014. They were brought in to tame competition for agency staff that in some areas, such as the West Midlands, had seen pay rates rise 30% over 18 months, and to reduce employee ‘churn’.

“From our analysis, across the 14 authorities in the West Midlands agreement we’ve saved £10 million annually [since it was introduced in January 2015],” says Jo Davidson, Herefordshire council’s director for children’s wellbeing and regional memorandum lead.

“What’s united councils is the knowledge that rises were unsustainable – and also inequitable against a backdrop where permanent staff saw a 1% increase year-on-year. It had to stop, and even if we achieve nothing else, over four years we’ll have saved £40 million.”

A memorandum has also been in place for more than two years in the East, where a £6.4 million forecasted spend reduction across the 11 member authorities has coincided with a drop in agency staff during 2016.

“Across the region as of December 2016 we have 161 fewer agency social workers than a year before,” says Joanna Ruffle, head of people and policy at Southend council and both regional and national Public Sector People Managers Association (PPMA) lead for the memorandum project.

More co-operation

In London, where 30 out of 32 boroughs have signed a memorandum, no data relating to financial savings is yet available. The local lead Nick Hollier, Bexley council’s deputy director for corporate support, says the arrangement’s main tangible benefit so far has been in improving authorities’ behaviour towards one another.

“Councils now have half an eye on the impact – and perception by other boroughs – of what they do,” he says. “Pre-memorandum, they would just decide to leapfrog one another in salary; now there is different mindset.”

With councils in all regions still in competition with one another for staff, keeping a more altruistic mindset intact means giving careful consideration towards how pay rates are pegged to roles such as social worker, consultant social worker or team leader. Creative use of job descriptions could otherwise enable needy councils to circumvent the caps. In the South West, where the local memorandum has only been in place six months, the regional lead Karen Reeve, Swindon council’s director of children’s services, says getting this understanding sorted has been crucial.

“It is possible [to fiddle the rates] and there was one incident that caused suspicion – we’re building from a position of authorities not being used to working together,” she says. “We spoke to the council concerned, and it turned out they were legitimately asking for – and getting more experienced social workers, and therefore paying a higher rate.”

Bending the rules

Reeve says that the South West agency rates have so far been strictly adhered to. She acknowledges though that one of the memorandum signatories experiencing an ‘inadequate’ Ofsted report or other event triggering a retention crisis would be likely to test this.

Where this has happened elsewhere, flexibilities have had to be adopted. In the West Midlands, two instances of members being unable to source good enough locums have been dealt with by allowing accommodation and mileage costs to be added to the base rate, for a limited period of time and restricted to workers new to the region.

In the East and in London, where circumstances have demanded it, councils have been able to opt temporarily out of the pay caps altogether – though usually only for certain hard-pressed teams or tricky localities such as rural areas.

“It’s about, how do we support them to get agency numbers down and stick to the memorandum [in the long term],” says Ruffle. “It’s not about slavishly following the cap if it means putting children at risk.” She adds that authorities in her region bordering London, where rates are higher, and Northamptonshire, which has yet to sign up to the East Midlands memorandum because of its own staffing problems, face particular challenges.

Teething troubles

As well as allowing the memorandums to bend by different degrees, different regions have so far diverged in whether they allow workers to leave a permanent role in one authority and start an agency one with another.

The East of England has taken a hardline approach, banning social workers from taking up agency work elsewhere in the region for 12 months after they leave a permanent job.

“We’re reviewing it at the moment,” says Ruffle. “It might seem draconian – and we are considering reducing that period – but we’ve been sticking to it and have examples of authorities carrying vacancies yet still turning workers away.”

Other areas such as the West Midlands and South West are still to thrash out how this will work within their memorandums, without disadvantaging workers who may have legitimate reasons for moving.

Matthew Egan, assistant national officer at union Unison, says it’s a difficult balance to strike. “Councils have had cuts and we support a settled workforce, but our main concern is that a punitive approach doesn’t necessarily address the root causes of why people might prefer to [move and] be employed via an agency,” he says.

Another function that’s still being worked on in most regions has been standardising reference systems and putting in place procedures to track agency workers, to avoid instances where individuals get roles they are poorly equipped to fulfil, costing councils more money and causing disruption for children and families. Most people we speak to report constructive dialogue with agencies on this issue, but several regions have yet to implement any settled system.

A stabilising picture?

While the mechanics of the memorandums continue to be refined, other factors may be starting to have a greater bearing on overall workforce stability. Changes to so-called ‘IR35’ tax rules, due to come into force in April, will see more agency staff paying full PAYE and National Insurance, the same as permanent employees, reducing the appeal of going locum.

Debbie Smith, CEO of the agency Caritas and social work sector chair at recruitment agency body APSCo, says it’s still too early to predict what will happen.

“At this point there is no data to suggest a decrease in the demand for locum social workers,” she says “In fact, our statistics suggest demand has risen UK-wide in the last quarter, largely as a consequence of the increasingly high permanent vacancy rates across children’s and adult’s services.”

But several regional memorandum leads we speak to say they are receiving more applications for permanent roles from agency workers than ever before.

“Some local authorities have done really well at converting temporary staff to permanent, and/or stopping moves to agency,” says Davidson. “It’s probably a combination of employers becoming more on ball that this isn’t a gravy train, and the incoming IR35 changes, but people are being much more circumspect.”

The levelling playing field is prompting at least one area – the South West – to amend its memorandum so as to impose a pay cut on agency staff who have been in post since before the agreement came in, bringing them into line with new locums. This will happen in March.

“That will be a true test of the memorandum,” says Reeve. “I’m not sure how many people we have left in that position, but there’s unlikely to be an exodus because they won’t have anywhere to go – our rates are benchmarked against neighbouring regions.”

Not everyone is being so bold – clearly many councils still have dire need for locums, especially experienced ones, and geography, demographics and Ofsted reports will all continue to have destabilising effects. But Ruffle says that the stage is set for councils to continue “eating away” at the agency market while making their memorandums more effective.

“We’ll take advantage of the IR35 changes, and continue to push the benefits of permanency,” she says. “This isn’t about screwing agencies over but having a more even relationship with them, reducing costs while raising standards and increasing stability.”

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