The short answer: the two costs behind care home payroll
Care home payroll costs you in two separate ways, and mixing them up is where most owners lose track of the real number. The first cost is the wage bill: the wages, employer National Insurance, pension contributions and holiday you pay your carers, seniors, nurses and ancillary staff. The second cost is running it: the fee to have that payroll processed, filed and kept compliant every month, alongside the bookkeeping and reporting it feeds.
The wage bill dwarfs the fee. Staff pay is the single largest line in almost every care home profit and loss account, typically 55 to 65 percent of income. That is why a few pence of drift under the minimum wage, or a run of agency shifts, moves your margin faster than a fee negotiation ever will. The processing fee matters, but it is the wage bill that decides whether the home is viable.
Both numbers are shaped by rules that sit outside ordinary bookkeeping. The Care Quality Commission (CQC) expects safe staffing and tests financial viability at registration and under its well-led question, HMRC polices the minimum wage across your rota, and The Pensions Regulator checks auto-enrolment. This guide is written by LOYALS, a King's Cross firm of accountants and business consultants that runs payroll, minimum wage checks and CQC-ready reporting for care homes across London and the UK. A generalist who treats a home like a shop will get the mechanics of payroll right and miss the sector traps entirely. For the wider picture, see our care home accountants page, and for the payroll service itself our payroll and PAYE page sets out what is included.
What a care assistant actually costs per hour in 2026/27
A care assistant costs more per hour than the wage rate on their payslip, and in 2026/27 the true figure lands around £16 an hour worked. The build-up starts with the National Living Wage of £12.71 an hour for staff aged 21 and over from 1 April 2026, up from £12.21 the year before, confirmed on the GOV.UK minimum wage rates page. That is the floor, not the cost.
On top of the wage sits employer National Insurance at 15 percent on earnings above the £5,000 secondary threshold, per the GOV.UK employer rates for 2026 to 2027, which for a full-time carer adds roughly £1.50 an hour. The workplace pension adds a 3 percent employer contribution on qualifying earnings between £6,240 and £50,270, close to £0.30 an hour. Then there is paid time the carer is not on shift: the 5.6 weeks of statutory holiday, training days and, from April 2026, sick pay from the first day of absence. Spread across the hours actually worked, that adds around £1.60 an hour.
Stack those together and the £12.71 headline becomes roughly £16.11 for every hour of care your rota actually delivers, and £15.50 to £16.50 once you include recruitment and cover. The waterfall below shows where each pound comes from.
That gap between the payslip rate and the true cost is where thin margins get eaten. A rota built on the £12.71 headline, with no allowance for the on-costs, understates your real wage bill by a quarter. On a home spending £1.2m a year on staff, that is roughly £300,000 of employer costs that never made it into the plan.
The monthly wage bill by care home size
The monthly wage bill scales sharply with beds and acuity, running from around £55,000 for a small residential home to well over £190,000 for a nursing home with registered nurses on the rota. Those are the numbers most owners feel in the bank account each month, and they are driven by headcount, shift patterns and skill mix far more than by the fee you negotiate with an accountant.
A rough shape for 2026/27, assuming staff costs land near the 55 to 65 percent of income that the sector runs on, looks like this. A 20-bed residential home carries roughly £55,000 a month of payroll. A 40-bed home is closer to £110,000. A 60-bed nursing home, where registered nurses command a premium and night cover is heavier, pushes past £190,000. The chart shows the jump.
Where this bites is agency. When you cannot fill a shift from your own team, an agency care assistant costs £22 to £28 an hour against the £15.50 to £16.50 all-in cost of a permanent one, and more on nights, weekends and bank holidays. A home that runs even 8 to 10 percent of its hours through agency is handing a large slice of margin to the staffing companies. We dig into that number in our guide on care home agency staff costs and the number that decides your margin.
The April 2026 changes that quietly raise the bill
Two changes from April 2026 push a care home's payroll cost up, and each lands hardest on a low-paid, part-time, high-turnover workforce, which is exactly what a care home runs. Getting ahead of them is cheaper than being caught by them.
The first is sick pay. From 6 April 2026 the three unpaid waiting days are gone, so Statutory Sick Pay is due from the first day of absence, and the earnings floor that used to exclude the lowest-paid is removed, so part-time and bank staff who never qualified before now do. The government reckons around 1.3 million more employees will qualify. SSP is £123.25 a week, or 80 percent of average weekly earnings if lower, per the GOV.UK Statutory Sick Pay guidance. In a care home with high sickness and a large bank list, the real impact on cover and overtime is bigger than the headline rate suggests.
The second is the minimum wage itself, now £12.71 for the 21-and-over rate. Because so many carers sit at or just above the floor, a rise in the rate lifts almost the entire wage bill, not just the lowest paid. It also tightens the compliance margin: pay that averages below the rate once you count travel between sites, handover time or a sleep-in shift is a breach, and minimum wage enforcement is moving to the new Fair Work Agency, which began operating in April 2026. The Supreme Court ruling in Royal Mencap Society v Tomlinson-Blake means a sleeping night worker earns the minimum wage only for time awake and working, which is a trap for homes still paying a flat sleep-in rate. The rules on which hours count are set out in the GOV.UK guidance on the minimum wage for different types of work, and our guide on sleep-in shifts and the minimum wage walks through it. Get the averaging wrong and an HMRC minimum wage penalty runs to 200 percent of the arrears.
The Employment Allowance question every care home should ask
The Employment Allowance is where care homes most often get it wrong, in both directions, and it is worth £10,500 a year off your employer National Insurance bill in 2026/27. The general rule bars any business that does more than half its work in the public sector, which on its face catches a home mostly funded by council and NHS placements. So a lot of owners assume they cannot claim, and stop.
That assumption is where the money leaks, because there are routes back in. A care home with charitable status keeps the £10,500 allowance whatever its funding mix. And HMRC's care and support worker rules, which have let employers of care and support workers claim since April 2021, give some providers a further route even where public funding is the majority. The tests turn on your legal structure and exactly who you employ, and they are set out on the GOV.UK Employment Allowance eligibility page.
The point is not that every home can claim, or that none can. It is that the answer is specific to your home and worth pinning down before every payroll year, because both mistakes are expensive. Claim in error and you are building up a National Insurance liability to unwind with interest; assume you are barred when you are not and you hand HMRC £10,500 a year for nothing. Across the care providers we run payroll for, this is the single most common £10,500 left on the table. The full set of tests, including the single-director rule and the connected-company restriction, is in our guide to the Employment Allowance for a limited company.
What it costs to have your care home payroll run properly
Because payroll in a care home cannot be separated from the bookkeeping, VAT, management accounts and CQC-ready reporting around it, the cleanest way to buy it is a fixed monthly managed finance function rather than a standalone payroll line. At LOYALS that runs from £795 a month for a single home, from £1,295 for a larger or nursing home, and from £1,995 for a group, all excluding VAT and fixed for twelve months. What you are paying for is not a payslip run, it is the whole finance function that keeps the home compliant and the margin visible.
Inside that fee sits Real Time Information filing to HMRC on or before payday, branded payslips, starters and leavers, pension assessment and uploads, statutory payments including the new day-one sick pay, P60s and year-end, and a rota checked so nobody quietly slips under the minimum wage. In a care home the real value is in that last part: the specialist who reconciles hours, spots the sleep-in and travel-time risks, keeps the Employment Allowance position right, and produces the management figures the CQC and your bank actually want to see.
Our pricing sits below, and the full breakdown is on the service fees page. For a sense of how the same maths runs in home care, our post on payroll cost for a domiciliary care agency with 50 carers works it through by carer count. If you are weighing whether to run the finance function in-house at all, our guide on an in-house bookkeeper versus an outsourced accountant for a care home compares the true cost of each, and for the bookkeeping layer priced separately, our guide on how much bookkeeping costs for a care home sets out the ranges by bed count.
Here is how the three common ways to run care home payroll actually compare:
| What a care home needs | DIY / software | Generic accountant | LOYALS specialist |
|---|---|---|---|
| Runs monthly RTI, payslips and pensions across a large rota | ● You process it | ✓ | ✓ |
| Checks minimum wage across sleep-ins and handover time | ✗ | ● If asked | ✓ Built in |
| Gets the Employment Allowance funding question right | ✗ | ✗ | ✓ |
| Handles day-one SSP from April 2026 for bank and part-time staff | ● | ● | ✓ |
| Tracks agency spend against budget for CQC viability | ✗ | ✗ | ✓ |
| Fixed monthly fee, Mon to Sat support | ✓ | ● Hourly billing common | ✓ |
This is why care home operators tend to move payroll to a care specialist rather than a general high-street firm.
What this means for you: what to do before your next pay run
If you want your care home payroll cost under control, the practical actions are specific and most of them take one afternoon. None of this is exotic. It is the sequencing that keeps the wage bill honest and the compliance clean.
- Cost your rota on the all-in hour, not the payslip rate. Rebuild your staffing budget on roughly £16 an hour worked, not £12.71, so employer National Insurance, pension and holiday are already in the plan.
- Get a definitive read on your Employment Allowance position. Confirm whether your structure and funding mix let you claim the £10,500, and stop guessing in either direction.
- Get ready for day-one sick pay. From 6 April 2026 bank and part-time staff qualify for SSP from the first day, so update your absence policy and your cover budget.
- Audit sleep-ins and travel time. Confirm no shift averages below £12.71 once awake working time, handover and travel between sites are counted, ahead of Fair Work Agency enforcement.
- Watch your agency percentage. Track agency hours as a share of total hours every month. Above 8 to 10 percent and it is the number quietly deciding your margin.
- Decide build or buy. If payroll and its compliance are eating a manager's week and mistakes are creeping in, a managed finance function from £795 a month is usually cheaper than the time and the risk.
Do these six and the payroll stops being a monthly surprise. You can check your own home's position against them in a free call with LOYALS, and if something is off we will tell you before it becomes an HMRC letter.
Run a care home? Everything on this page is part of the day job for our care home accountants, who handle payroll, minimum wage compliance, VAT and CQC-ready reporting for residential and nursing homes across London and the UK.