A new body to negotiate changes to pay and terms and conditions for care workers will be set up and will include both employers and trade unions.

The body will aim to improve recruitment and retention, giving staff better recognition for their important work, and this initial investment will mean that by 2028, care workers will expect to see a boost in their yearly wages.

A public consultation to gather views on the design of the Fair Pay Agreement process has also been launched by government. 

Following this, the Adult Social Care Negotiating Body will be established through regulations in 2026, with the initiative coming into force in 2028.

The Fair Pay Agreement will be backed by law, which is currently progressing in Parliament through the Employment Rights Bill, and will empower employers and unions to negotiate better terms and conditions.

Reaction

Danny Mortimer, chief executive of NHS Employers, said: ‘This is a positive next step in ensuring investment in the social care workforce. Government, social care employers, and trade unions have worked diligently to get to this stage, and they will need to continue in the same spirit of partnership as they work to build a sustainable pay and reward offer for the vital social care workforce.'

Lucinda Allen, policy fellow at The Health Foundation, said: ‘Fair pay agreements have the potential to be transformative, but ambition must be matched by investment. Today's announcement of £500m funding for the first Fair Pay Agreement in social care in England will not be enough to provide a meaningful boost in staff pay. Shared evenly between the 1.5 million workers in the sector, for example, it could amount to roughly 20p extra per hour each. Our analysis suggests £2.3bn would be required in 2028/29 to increase pay to the level of clinical support workers and administrative workers in the NHS (Agenda for Change Upper Band 3).

‘If wages rise without more government funding, costs will fall on councils and providers – ultimately, this risks cuts to people's services and higher fees for those who fund their own care. The government must commit to sufficient and long-term funding for its flagship social care policy and work closely with those who need and provide care as they design this policy.'

Professor Martin Green, chief executive of Care England, said: ‘While the creation of a Fair Pay Agreement represents a long-awaited acknowledgement that care work is a skilled profession deserving of fair reward, today's announcement does little to deliver any meaningful change for our workforce.

'It is a shame that after so many promises, the outcome amounts to as little as 15 pence per hour if focused solely on pay; something that will make little difference in practice by the people who keep this sector running.'

He added: ‘The Government has raised expectations by branding the Fair Pay Agreement as the answer to the recruitment and retention crisis in the sector, using it to justify the restrictions placed on international recruitment, which many providers previously depended on to keep services running. But with funding this slight, it is hard to see how providers will attract or retain the staff they desperately need, undermining the very purpose of the agreement.'

Liberal Democrat Care and Carers spokesperson, Alison Bennett, said: ‘It is good the Government is finally taking steps to pay our care workers properly, as Liberal Democrats have long called for. But ministers need to properly fund this pay rise, instead of relying on local authorities hiking council tax.

 ‘Without the extra investment our social care sector needs, this is simply robbing Peter to pay Paul.

‘The Government must complete its review into social care this year and urgently implement reforms to bring care back from the precipice. We need a plan that ensures high quality care is available to everyone who needs it, not just a series of headline-grabbing, short-term announcements that fail to adequately address the scale of the crisis.'

Nuffield Trust deputy director of research, Natasha Curry, said: ‘The Government's fair pay agreement offers recognition that action is needed to improve pay and conditions of care workers.

‘The bear trap in today's announcement is - as is so often the case - the money. This extra £500m, already announced at June's Spending review, is not new, will not arrive until 2028, and will need to come from funds already needed to keep social care afloat and meet the needs of the people that rely on it.

‘The spending pressures on social care cannot be overstated: the extra needed this year for additional employers' national insurance contributions more than wipes out this £500m. The agreement will also rest on extensive negotiations through the new negotiating body - which will now have to be constrained by this figure.'

Will Dalton, GMB national officer, said: ‘If we get it right, FPAs are a potentially seismic change in the care sector. For too long these workers, who play a fundamental role in our society, have suffered poor pay, terms and conditions.

‘FPAs will enable us to negotiate and actually pay carers a living wage, while developing the industry into one safer, more respected and better valued.'