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 administrative: the fee to have that payroll processed, filed and kept compliant every month.
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 levels and tests financial viability at registration, HMRC polices the minimum wage across your rota, and The Pensions Regulator checks auto-enrolment. A generalist who treats a care home like a shop will get the mechanics of payroll right and miss the sector traps entirely. For the wider picture on getting care home numbers right, see our healthcare and care sector 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
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 6 April 2026, up from £12.21 the year before. 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, which for a full-time carer adds roughly £1.50 an hour. The workplace pension adds another 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 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
Three changes from April 2026 push a care home's payroll cost up, and each one 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 Lower Earnings Limit is abolished, so part-time and bank staff who never qualified before now do. SSP is £123.25 a week, or 80 percent of average weekly earnings if lower. The government estimates roughly £15 per employee a year in extra cost, but in a care home with high sickness and a large bank list the real impact on cover and overtime is bigger. HMRC sets out the new rules in its Statutory Sick Pay guidance.
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 from April 2026 the new Fair Work Agency takes over minimum wage enforcement. The Supreme Court sleep-in 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 flat sleep-in rates. Our guide on sleep-in shifts and the minimum wage walks through it.
The third is not new, but it is the one generalists miss most: the Employment Allowance. Most employers knock £10,500 off their employer National Insurance bill with it. A care home cannot, if it gets more than half its fee income from local authority or NHS funding, because it is then treated as a public authority under HMRC rules. A home that tips over the 50 percent line and keeps claiming is building up an error to unwind, and a home that is genuinely majority private-funded but never claims is handing HMRC £10,500 a year for nothing. Which side of the line you sit on is a number worth checking before every payroll year.
What it costs to have your care home payroll run
Having a specialist run your care home payroll typically starts from about £75 a month plus roughly £10 per employee, and most homes fold it into a full accounting package rather than buy it alone. For a 40-strong team that puts standalone payroll around £475 a month, though the exact figure depends on pay frequency, pension scheme and how many starters and leavers you churn.
What that fee should buy is more than a payslip run. Real Time Information filing to HMRC on or before payday, branded payslips, starters and leavers, pension assessment and uploads to your provider, 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 value is in that last part: the specialist who reconciles hours, spots the sleep-in and travel-time risks, and keeps you clear of an HMRC minimum wage penalty, which can run to 200 percent of arrears.
Because payroll in a care home is inseparable from bookkeeping, VAT and management accounts, the cleanest route is usually a bundled monthly fee. Our pricing sits below, and the full breakdown is on the service fees page. For a sense of how the wider running cost compares by carer count, our post on payroll cost for a domiciliary care agency with 50 carers runs the same maths for home care.
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 |
| Flags the Employment Allowance council-funding trap | ✗ | ✗ | ✓ |
| 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.
- Check your Employment Allowance position. Work out whether more than half your fee income is council or NHS funded. If it is, you cannot claim the £10,500, and claiming it in error is a liability building up.
- 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 is eating a manager's week and mistakes are creeping in, a specialist bureau from about £75 a month plus per employee 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, and if something is off we will tell you before it becomes an HMRC letter.