Amid ongoing controversy over a tax crackdown on independent contractors working in the public sector, the earnings gap between agency social workers and permanent staff is tightening, a Community Care investigation reveals.
For years, the hourly rates and potential for high take-home pay available to locums employed via recruitment agencies has been a significant attraction to social workers looking for an alternative to full-time local authority employment, and the appeal hasn’t vanished.
Responses from 107 councils to a Community Care freedom of information (FOI) request shows that in a handful of English local authority areas experienced qualified social workers can still command more than £35 per hour. That equates to a nominal annual pre-tax pay of at least £62,100.
By contrast, the highest basic top-line salary provided to us for a similar staffer was just over £45,000, in London’s Westminster. Across most of the country, such a social worker could expect to earn much less, between £33,000 and £37,000, before tax.
But such comparisons do not tell the whole story. The investigation, which aimed to ‘price up’ different social work grades and uncover how much temporary and permanent workers cost councils, also shows the extent to which regional caps have driven down agency rates in many areas.
Combine this picture with HMRC’s tax changes last April to off-payroll working rules – so called IR35 legislation – and it’s easy to see why there’s talk of agency workers, who mostly receive no sick or holiday pay, moving back into permanent employment.
This first of a two-part report based on our FOI research, looks at what permanent and temporary social workers can earn in different regions – and what, in the post-IR35 landscape, they might take home.
Across most of England, the basic salaries councils said they pay permanent social workers were remarkably consistent.
Within children’s services, five of the nine English regions’ median rate for an experienced qualified social worker at the top of their pay scale was between £32,500 and £34,400. The national median was £35,444. A similar picture could be seen among advanced practitioners (national median £40,038 at top of pay scale) and frontline team managers (national median £45,471 at top of pay scale).
Children’s social worker pay: permanent staff
Use our interactive map to look at the top pay scale for social worker roles across England.
Pay rates in adults’ social care closely mirror those of children’s. Asked about the same grades of employee, the national top-of-scale medians were identical for experienced social workers while for advanced practitioners and team managers the figure was slightly lower at £39,937 and £44,030 respectively.
Adults’ social worker pay: permanent staff
Look at adults’ social worker salaries across England using our interactive map.
“Each social services department will determine the right approach for their local area, based on the different needs of how the demands on social work are felt, and how they impact their local communities,” says Glen Garrod, vice president of the Association of Directors of Adult Social Services (ADASS).
Service directors we spoke to pointed to factors influencing the basic salaries councils pay their social workers, including geographical challenges, workforce supply and demand trends, and budget constraints. Of course, roles with identical job titles may also vary in terms of duties and responsibilities from council to council.
“Where there are more local authorities, in close proximity, people are more mobile,” adds Rachael Wardell, the director of children’s and adults’ services at West Berkshire council and national workforce lead for the Association of Directors of Children’s Services (ADCS). “If [a worker] could check out of this council and get another job half an hour away, you have to be more competitive.”
London’s gravitational pull
Some fierce competition takes place in and around London, where dozens of local authorities sit within commuting distance of one another.
Within the capital itself, the median rate at the top of the payscale for an experienced qualified social worker is £39,855 for children’s services and £40,086 for adults’. Expensive inner-London authorities offer the largest basic salaries, with Westminster paying up to £45,438 for both children’s and adults’ social workers.
London’s gravitational pull is also apparent in the areas surrounding it, particularly in the South East region where, our research found, social workers and frontline managers can attract a basic salary several thousand pounds higher than elsewhere. “The further east along the M4 you go, the higher you’re likely to be paying,” says Wardell.
Examples include Slough and nearby Windsor & Maidenhead where a qualified social worker could command a top scale salary of almost £42,000. In a number of South East authorities frontline team managers could earn more than £50,000.
The impact of agency caps
Memorandums of understanding (MoUs) covering rates paid to agency social workers – particularly within children’s services where demand has tended to be highest – have been big news over the past three years. Interviewed a year ago, regional lead officers said they had been saving many millions and were probably contributing to a less volatile recruitment marketplace.
Capped agency rates are now a feature across most of England. Our FOI data reveals the difference they have been making to agency social workers’ top-line earnings.
In the North East region, which only recently introduced its MoU, South Tyneside council – alone among respondents – provided a direct comparison of ‘before’ and ‘after’ rates. Historically, senior qualified social workers could command £170 a day, the authority said, while advanced practitioners earned up to £193 and frontline team managers up to £229. Since caps had been brought in, the figures had fallen to £147, £169 and £194 respectively – though some North East councils for now still have agency workers on their books at higher rates.
Elsewhere, caps are set at hourly rates, which directors from five other English regions (London, the South East, the East of England, the East Midlands and West Midlands) provided to us.
In London and the South East, qualified social workers receive up to £32, while the other regions pay £28-29. For advanced practitioners the rates are £35 (London and the South East) and £32 (elsewhere), while for team managers they are £42 and £38-39.
All these rates apply to agency workers operating their own limited company – the majority – who pre-IR35 were often liable for far less tax than permanent colleagues, and were able to offset many expenses such for as travel and accommodation.
“The long and short is that most local authorities recruit agency social workers at cap,” says Steve Stuart, the programme manager for FutureSocial, a workforce capacity-building project between the 14 West Midlands councils.
“That said, they can be brought down and if local authorities want to try to bring in some flexibility they can do that,” Stuart says, adding that West Midlands authorities have introduced a 36-point scale for agency workers to help employers.
Bending the rules
But elsewhere we uncovered instances of agency workers still being paid much more – up to £40 per hour for social workers, £43 for advanced practitioners and £50 for team managers.
When we checked these anomalies with individual councils we found some related – as in the North East – to agency workers employed before MoUs came in and still on ‘legacy’ rates. Some councils – Leicester and Leicestershire, for instance – had also been given temporary dispensation to advertise a few hard-to-fill roles at rates outside their MoU.
Others, such as Slough, have been simply unable to sign up to their regional memorandums because their ongoing workforce challenges are too severe.
Finally, we found isolated cases of managers engaging staff at above-cap prices. At one such council, Ealing, the interim director for children and families, Carolyn Fair, told us the practice had only affected three posts and had now been stopped.
But agency sources we contacted, who spoke on condition of anonymity, said it was not an unusual occurrence.
The narrowing take-home pay gap
It’s long been received wisdom that agency workers pocket far more for a day’s work than their permanent counterparts, but is this still the case after last year’s tax changes?
Everyone’s financial affairs are different. We have disregarded bonuses for the purposes of this article, and that’s before we get into the many other factors, such as union subs to name just one, that can affect an employee’s pay packet.
But plugging in a £35,000 salary, with a 5.5% pension contribution, into an online calculator gives a nominal take-home figure of just over £25,500. A £40,000 salary comes out at just over £28,700 and a £45,000 one results in a little under £32,000.
By contrast, an agency worker on a capped rate of £28 per hour and being paid for 37 hours, 47 weeks a year would invoice for £48,692 over the year.
But, as an example in this spreadsheet produced by tax expert Carolyn Walsh demonstrates, they will take home much less. Walsh created the document to show that for most agency social workers, the difference in take-home pay between paying tax through one’s limited company and transferring to an umbrella company will be minimal – except where the umbrella is making a ‘too good to be true’ offer.
By the time employer’s national insurance contributions – which most agency workers have been liable for post-IR35 – and other costs are deducted, a weekly invoice of £1,036 becomes a ‘basic pay’ packet of £926. That translates into a take-home figure of £679 – and because few agency workers will work 52 weeks of the year, this will come down further once it has been spread out to account for unpaid weeks of holiday.
“It is the basic pay, also called deemed or employment income figure, that locum social workers should be looking at when ascertaining their comparative salary figure,” says Walsh. “They should not be thinking that a rate of say £28 per hour payable to their limited company, or to an umbrella company, is their pay rate – but few I see have realised this.”
On the face of it, the agency worker on £28 per hour still stands to take home almost £32,000 – well above their permanent staff peer’s £25,500 – according to Walsh’s calculator. But if you start removing days or weeks for sickness, factoring in costs for training or pensions, or considering the bonuses that may be on the table for new permanent recruits, it’s easy to see that gap rapidly narrowing.
Many social workers have argued they chose the agency life for flexibility – and in some cases freedom from corrosive working conditions – rather than money.
Yet that flexibility has been underpinned by the higher pay, and reduced tax liabilities, which have enabled workers to take breaks from roles that are often stressful even by social work standards. What happens next in the social work recruitment marketplace remains to be seen.