The Fair Pay Agreement (FPA) in adult social care, part of the Government’s Employment Rights Bill and its broader ambition to ‘Make Work Pay’, is a welcome initiative. As our research has shown, pay in the sector remains low, with most care workers earning at or near the National Living Wage, regardless of their experience, qualifications, or length of service. Even senior care workers often receive only marginally higher wages, discouraging progression into leadership roles. This persistent undervaluation contributes to the perception of care work as low-skilled and low-status, despite it being meaningful work and offering high levels of job satisfaction. The result is a chronic workforce shortage, which undermines the quality of care and can lead to poor experiences for those who rely on these essential services.

Low pay lies at the heart of the recruitment and retention crisis in adult social care. In 2024-2025, turnover stood at 24%, with 111,000 vacancies, roughly 7% of roles unfilled, according to Skills for Care. While these figures show slight improvement over previous years, largely due to international recruitment, that labour supply is now shrinking due to visa rule changes. Building a sustainable workforce remains a persistent challenge, even as demand rises with the UK’s ageing population. Addressing low pay is essential to attract and retain staff, ensuring the sector can deliver high-quality care to those who need it most.

How will the Fair Pay Agreement improve pay in adult social care?

The Fair Pay Agreement (FPA) will set minimum standards for pay and other terms and conditions of employment in adult social care through sector-wide collective bargaining. This means that trade unions, employer representatives, and other stakeholders will come together to negotiate pay and conditions. The process will be led by the newly established Adult Social Care Negotiating Body (ASCNB), which will be created through the Employment Rights Bill and is expected to begin operating in 2026.

The ASCNB will conduct annual pay negotiations, taking into account government priorities and working within a defined funding envelope when setting pay and conditions.

However, the first Fair Pay Agreement will not come into effect until 2028, as significant groundwork must be completed beforehand. This includes:

1. Defining the scope of the FPA – while basic pay will be covered, decisions are needed about which other terms and conditions to include. These could range from pensions and holiday entitlements to contractual arrangements, sleep-in payments, and travel time.
2. Appointing key stakeholders – identifying and confirming the trade unions, employer bodies, and other representatives who will form the ASCNB.
3. Securing funding – ensuring that financial resources are in place to support the negotiated pay and conditions from 2028 onwards.

This process represents the first in a series of planned sectoral agreements and will serve as a critical test case for the Government’s broader ambitions around fair pay and employment standards.

What should policymakers do?

This is a pivotal moment in adult social care: the Government has the opportunity to enact legislation that will tackle a longstanding sector crisis and improve the lives of both workers and the people who draw on its services. Yet the success of the Fair Pay Agreement will hinge on one critical factor: funding. Approximately three-quarters of adult social care is state-funded and commissioned by local authorities from private and voluntary sector providers. As our research has shown, decades of underfunding by central government have left local authority fees too low to cover the full cost of care. As a result, providers are unable to offer fair pay and decent terms and conditions of employment. If they are to meet the requirements of a Fair Pay Agreement, they must be supported with the funding necessary to do so.

This is no small matter. For example, Skills for Care’s 2024 adult social care workforce strategy estimated the cost of raising care worker pay to levels comparable with NHS Health Care Assistants. Introducing a minimum rate equivalent to Agenda for Change (AfC) Band 2 would carry an estimated annual public cost of £2.3 billion. In the same year, the Department of Health and Social Care introduced new career pathways, emphasising their importance in building a skilled adult social care workforce. In line with this, Skills for Care calculated that offering AfC Band 2 and Band 3 pay rates, designed to support both fair pay and career progression, would cost around £4 billion annually. While these are significant sums, Skills for Care suggests that such investment could generate long-term public savings over a 15-year period by improving recruitment and retention and easing pressure on the NHS.

Yet the UK is experiencing substantial economic pressures and there is little indication that these kinds of sums are likely to be available to support implementation of the Fair Pay Agreement. Indeed, the most recent Government announcement on funding sets out that, of the extra £4 billion to be made available to adult social care by 2028-2029, only £500 million has been earmarked for the Fair Pay Agreement. This is to address pay for a workforce of around 1 million care workers and senior care workers, those most likely to be covered by the Fair Pay Agreement. There is broad consensus across the sector that the current funding allocation is insufficient. For instance, the Health Foundation estimates that the proposed funding could result in a pay increase of just 20p per hour for most care workers, far short of what is needed to realise the government’s ambition of fair pay in adult social care.

While the Fair Pay Agreement could recommend more substantial pay rises, not providing the required funding creates serious risks. Local authorities, already under severe financial strain, may be forced to divert resources from other essential services to meet new pay obligations. Providers in the private and voluntary sectors could face heightened financial pressure, potentially leading to market exits or the return of care packages to local authorities. Others may be compelled to cut costs in ways that undermine workforce stability and care quality, for example, by increasing the use of zero-hours contracts or reducing services. These outcomes would run directly counter to the goals of the Fair Pay Agreement, which aims to improve pay, conditions, and care quality across the sector.

It is therefore essential that funding matches the scale of ambition. One potential route to achieving this lies in broader sector reform, particularly through the work of the Casey Commission to establish a National Care Service, a key commitment in the government’s manifesto. While the Commission’s initial report is expected in 2026, its final report, due in 2028, will outline proposals for system reform, including both the sector’s offer and how it should be funded. This timeline presents an opportunity to identify long-term funding mechanisms both for the adult social care sector generally, but also specifically for the Fair Pay Agreement.

Together, the Employment Rights Bill and the Fair Pay Agreement represent an opportunity to build a sustainable, future-ready workforce and to address the sector’s longstanding recruitment and retention challenges.

We urge policymakers to prioritise the necessary funding to secure its success.