The Effects of Rising Wages on Home Care

I won't discuss any political arguments and would also ask that the readers bear in mind that I am not an economist, but will share my observations on this subject based on my own experiences.

Back in 2012 a group of fast-food workers in New York City walked off the job to protest their meager wages. Their demands included union rights and a $15/hour pay rate. This event was covered by the national news and was the inception of a movement knows today as the "Fight for 15".

In the following year, the movement has gained traction and many people have shared their opinion, with celebrities and politicians all sharing their viewpoint for and against. This hotly debated issue eventually led to a group of politicians to propose a bill called the "Raise the Wage Act" which would have phased in increases over a few years, ultimately surpassing the $15 goal. At the time this article was posted, the federally mandated wage increase has not passed.

Big companies, such as Costco, Amazon, etc., were originally resisting the move, but then voluntarily increased the wages. This, along with a number of other factors, has created the general belief that there is a shortage of caregivers. There are a number of opinions on this, we tend to believe that it is mostly a myth, the issue isn't a shortage, the issue is one of retention.

Once again, I am not an economist, but I have worked with many Home Care Agency owners across North America, with the majority being in the United States and have seen many trends. One of these trends has been caregivers leaving the industry in pursuit of higher wages. They have gone into big box retail or warehouse work because they are being offered steadier, more predictable work schedules at higher pay rates.

This trend can create a major issue for agency owners because many don't want to raise prices out of fear of alienating clients. This fear will either will have 1 of 2 outcomes. the first is that they stop increasing pay for the caregivers or reduce (and sometimes stop) caregiver retention programs and the other is they will offer more pay, reducing their margins in the process.

The first issue is pretty self-explanatory, if you stop retention programs or stagnate your pay, the "caregiver shortage" will begin to affect your agency. The second is a little less obvious, but can have a much bigger impact...reducing margins. A shift as little as $1 can have such a tremendous impact on your agency. If you are newer in business it can extend the time before you hit your monthly break even by as much as 3 months. If you are more established, poor margins can effect your agency's ability to grow and scale. These numbers are important to understand regardless of whether you are an independent owner or a franchisee, the results of poor margins can be devastating. If you have any doubt, register for our free training on the $1 Dollar Difference and use our simple Home Care Gross Margin Calculator to see for yourself.

So how do we avoid catastrophe, offer a decent wage and not lose our clients? Well, we move forward smartly. Learn about the trends and develop a solid pricing strategy that will allow us give the caregivers what they need without hurting our ability to take care of our other staff or grow our business. To successfully make these adjustments:

  • Make sure your clients feel they are getting their money's worth

  • Keep your pay competitive to your market

  • Don't lose sight of your margins

Sounds simple, but don't forget the most important part of the entire process, find help if you aren't sure. No one is born knowing everything and training is an investment, not an expense. Not sure where to begin? A good place to begin is with our Pricing for Profits Course where we go over in 5 simple steps how to raise pay, raise pricing and not lose clients. You can also join our Facebook Group and subscribe to our YouTube Channel where you can keep find many resources.

P: 833-320-1144 T: 908-838-7533 F: 908-488-0088

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©2020 by Briones Consulting Group
All information and services provided are based on the personal and professional experience of your consultant(s).