Counting the cost
Phil Saunders looks at the issue of hourly rates<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
The news that at least one authority is paying just 80 per cent of Supporting People (SP) contract sums up front, subject to a detailed reconciliation of face time spent by staff with clients, is extremely worrying. It further reinforces the view that only time spent in front of customers is worth paying for. It has echoes of the domiciliary care model, where only the time actually spent in the client’s home is deemed to be chargeable. Together with pressure on prices, it could lead to a low wage culture where staff are not paid for essential administrative work, let alone travelling time.
In this article, I want to look at the implications of differing approaches to hourly rate models, for costing and pricing. But first, let’s see if there are any good reasons for restricting hourly payments to face time only. Well, quite reasonably, many customers want a full hour of support for their money. In a system with a lot of self funding clients (or those managing individual budgets) there will be increasing focus on what service users want and what they actually get.
This is not something the sector should get unduly defensive about. For instance, most of us have had driving lessons – and wanted the instructor to be outside at the start of the hourly session. We’d complain if they said that they’d had to drive over from another appointment – or if they dropped us off early to get to someone else’s.
It would be quite hypocritical to argue that vulnerable service users do not have similar customer expectations. But, of course, the real point is that the driving instructor calculates their price for an hour’s session taking account of how many clients they can see in a day, how much time they spend on travelling between appointments, the maintenance of their car and, of course, what they think their customers will pay. Fees for professional services can seem high because of these sorts of calculations. Many local authorities seem to be looking for low hourly rates and a restricted view of what comprises an hour’s service. This could put unreasonable pressure on providers and raise customer expectations too high.
High input, low cost
To my mind low rate, high input models tend to be delivered by:
• Local authority inhouse services, which do not quantify or attempt to cover the full cost of management or overheads.
• Large firms who can afford to price at marginal cost where they can absorb overhead costs in other contracts;
• Lean, almost virtual organisations with a small head office functions and teams of (in effect) “franchised” workers, who operate remotely.
Both these kinds of provider have been common in the provision of social care for years. I think, in a SP world (at least in part) increasingly dominated by Adult Social Care, this is driving the low rate/high input hourly rate model.
But does it matter? Won’t this approach just lead to higher hourly rates that take nonchargeable time into account? Surely, local authorities understand that all organisations have to cover their costs or make a return on their business? Won’t market prices just naturally rise?
One problem is that this may increase the risk of commissioners not differentiating between a low skill/low wage service that carries out practical tasks for clients and a service that requires more highly trained staff to empower, advocate and support.
The other problem is that no two local authorities seem to take the same view of what constitutes a “support hour”. At Sitra, we have come across the following range of approaches. A support hour can be:
• Any hour for which a support worker is paid, including contractual entitlements and benefits such as holidays.
• Any hour for which a support worker is paid and they actually attend work (which excludes, say, holidays).
• Any hour for which a support worker is paid and they spend on support activities (this can exclude, for example, training and supervision).
• Any hour for which a support worker is paid and they spend on support service delivery (as well as all of the above, this can exclude dealing with other agencies and even case conferencing).
• Any hour for which a support worker is paid and they actually spend with clients.
Prices can be worked up on all these bases, but how can meaningful negotiations and benchmarking take place if:
• Providers are not sure what an authority’s definition is?
• Authorities use new definitions in particular procurement exercises, which depart from local practice to date?
• Attempts at standardisation, such as the Sitra/NHF/Housemark benchmarking model, are not universally accepted?
A plea for consistency
I would urge any provider involved in SP to press their authority for a consistent definition. These should take account of accommodation based services as well as floating support. In particular, they need to know the authorities approach to the cost of cover for holidays and time off sick, recognising that this has to be related to the client group and type of service provided. Again, Sitra has seen wide variations in incorporating the cost of cover in hourly rates, including:
• No specific cover of holidays and time off sick - but colleagues will provide informal cover for each other as required.
• Cover for holidays and time off sick is required. The extra hours are to be purchased by the authority at an agreed hourly rate.
• Cover for holidays and time off sick is required but will not be purchased separately by the authority. Providers should include the cost of cover in their “core” hourly rate.
And this is without getting into the issue of whether “out of hours” cover should be cheaper, more expensive, the same price or included in the core rate. To illustrate the point further, take a look at the calculations in Table 1 below. These figures are for illustrative purposes only. But the anecdotal evidence suggests that some authorities (consciously or otherwise) seem to want to pay for face time only at all-inclusive rates. So, to facilitate more meaningful discussions, I would suggest that the all-inclusive approach is adopted, in line with the approach adopted in Sitra’s training courses and the Sitra/NHF/Housemark Benchmarking Framework.
This is because:
• It is much easier to standardise – employees contracted hours tend not to vary much day to day and are well known to commissioners and providers.
• It simplifies time recording and activity based costing.
• It is suitable for accommodation based services, where face time is less likely to be in easily counted blocks but is interspersed with other support activities.
• It is easier to monitor for the authority.
• It enables cover to be purchased additionally where required, at the same hourly rate.
• Established outcomes and quality frameworks now sit alongside monitoring of hourly inputs. A strong argument for making time apportionment exercises as simple as possible.
The customer interface issue can be dealt with by having different rates for charging and contracting. In floating support services, users would “pay” a face time rate that takes account of the full contract sum. This makes explicit the important difference between costing and pricing. The customer pays for what they get – they are not interested in the arrangement between the provider and the authority.
In any case, there is urgent need is for a level playing field. Responding to procurement is difficult enough without uncertainties around costing and pricing. In the worst cases, fair competition is being undermined by misunderstandings. Furthermore, the lack of a common approach is in danger of making value for money impossible to quantify.
Table 1
| Contract basis (35 hour week) | Support hours provided | Wages and on-costs £ | Non staff scheme and overhead costs £ | Hourly rate | Total Cost |
| All inclusive | 35 | 550 | 50 | 600 | 17.14 |
| Ex leave | 32 | 550 | 50 | 600 | 18.75 |
| Support only | 28 | 550 | 50 | 600 | 21.42 |
| Face time only | 24 | 550 | 50 | 600 | 25.00 |
