Kate Wyatt on why charities must be more proactive on social care

As the third sector faces continuing pressures from wage bills and public-sector funding squeezes, some social care charities are becoming more proactive in their relationships with commissioners. The wider sector can learn from them.

In recent weeks, we’ve seen individual charities start to renegotiate mid-contract with individual councils – and not at a pre-arranged negotiating or break point. We’ve also seen charities taking a firmer stance in new contract negotiations. They’re enjoying some success, particularly in areas where there are limited alternative providers.

These tougher stances are much needed. A study this year by charity thinktank NPC showed that almost two-thirds of charities (64%) have had to use other sources of income, such as fundraising, to deliver their public-sector contracts.

Though these figures are based on charities in England and Wales, there is no reason to suggest Scotland is hugely different on this. Scottish social care charities face a similar cocktail of rising wage and national insurance costs, straitened council budgets, and rising demand for services.

And though the Scottish Government has provided extra resources to fund payment of Scottish National Living Wage for care workers, this funding is not covering extra costs such as having to pay National Minimum Wage for sleepovers (rather than flat rates per shift).

Another problem Scottish social care charities share with their counterparts in the rest of the UK is their inexperience at negotiating contracts. If they want to strengthen their financial position and level the playing field with local authorities and NHS trusts, they have to get smarter about this. The private sector offers some useful lessons here.

The first lesson is to take advice before signing, renegotiating or terminating a contract or Service Level Agreement (SLA). It’s understandable that third sector organisations want to be lean in terms of overheads and professional fees. But too often this means they’re unaware of basic pitfalls and protections that businesses of similar sizes would know about.

For example, in other sectors, it’s common enough to include price adjustment mechanisms or break clauses in a contract. These set out defined circumstances in which fees or service levels may be varied or renegotiated, and are not rocket science in legal terms. Yet charities routinely neglect to ask for them.

Price adjustment mechanisms around the introduction of mandatory above-inflation wage increases (such as the introduction of National Living Wage) could well have spared many charities from the pain they’re currently suffering. And though not every eventuality around rising costs can be foreseen or covered, these mechanisms are certainly something every charity should think about.

A second lesson to learn from the private sector is to be more tactical about (re)negotiating care contracts and SLAs. This may require a combination of pragmatic legal expertise and understanding the strength of your bargaining position (or getting advice on what that is).

If charities want to operate on the front foot in their relationships with commissioners, then being better-informed, harder-headed and bolder is the way forward. We see already that this is working.

Kate Wyatt is a Partner in Lindsays’ Employment team.