Minimum Wage Increases: How Will it Impact the Home Care Industry?

Bill-McPherson-200x300.jpgThere has been a lot of speculation about how the Department of Labor’s (DOL) decision not to uphold the Obama administration’s 2015 rule stipulating overtime and minimum wage protection to approximately 2 million home health care workers will affect the home health care industry as a whole, and the franchise home care staffing segment in particular.

The fear is that with new minimum wage requirements set to go into effect December 1, 2016,  the services offered by home care franchises will cost more, making it harder for families to be able to afford non-medical in-home care for their disabled or elderly loved ones needing assistance.

Additionally, the recent DOL decision to issue new overtime salary exemption limits for salaried workers that were also scheduled to become effective December 1, 2016 have home health care staffing franchisees worried. The concern is that the new rules allow those salaried workers making up to $47,476 per year (almost double the previous salary amount) to receive overtime pay when they work more than 40 hours a week. Since many home care workers work more than 40 hours a week, it is thought this could cause financial problems for home care franchisees and their customers if the franchisee has to charge more to make up for the potential wage increases.

Because there has been so much back and forth over what these rules mean and how the home care industry will be able to handle the changes, according to Disabilityscoop.com, it appears that the Labor Department is committed to not enforce the ruling on overtime pay until after March 17, 2019 for certain providers. This could change, but it is the latest information available at this writing.

If there is a delay, it will surely be a relief to home health care businesses and franchises who are concerned about the rulings and the implications they present. While the jury is still out on whether the changes will actually affect the ability of health care staffing agencies to provide affordable services to the approximately 12 million  individuals (according to the latest statics available from the National Association of Home Care & Hospice) who receive home health care, it’s important for franchises, franchisees and healthcare staffing agencies to stay on top of these regulations and comply.

Noncompliance with the new rules could mean hefty financial fines for employers who do not follow the DOL’s regulations.

Some of the concerns non-medical home care staffing franchisees have include:

  • Minimum wage regulations will have a negative effect
    The federal minimum wage is currently set at $7.25 an hour and this concern seems out of place when according to the U.S. Department of Labor the actual average wage for “direct care” workers was about $10 an hour in 2012. There may be some workers who will see an increase in pay, but it’s unlikely to cause financial hardship for most employers.
  • The overtime rule would prevent families from using home health care workers due to cost increases franchisees would be forced to charge due to overtime costs

This is something that hasn’t happened yet and is questionable that it ever will happen. In a recent article published on HomeHealthCarenews.com, Catherine Connolly, home care fair pay campaign coordinator with the National Employment Law Project (NELP) said it is something that’s really not going to impact employers because very few home health care workers are salaried workers.

  • Medicaid payments have not been adjusted to take into account the potential increases in the cost of care to families and caregivers

Some agencies have reported that there are situations where home health care employers have had to reduce care worker hours and hire additional workers to avoid paying overtime costs. It’s possible that this could end up causing caregiver shortages and an unmet demand for affordable caregivers to care for those with limited budgets.

The fact is we really don’t know how these rulings will affect the home health care franchise industry’s bottom line. We do know that the need for qualified, experienced home health care caregivers is going to increase as the population ages. It is estimated that by 2050 the proportion of individuals in the U.S. aged 65 and older (15.6 percent) will be more than double the number of children under age 5 (7.2 percent) according to the U.S. Census Bureau.

This trend is also a global trend, according to the Census Bureau, with the growth of the world’s older population expected to continue to outpace the growth of the younger population for the next 35 years. The more compelling question is if the health care industry is prepared to meet the demands for qualified health care workers as the population ages, and how to attract more in-home health care workers to provide the skilled care an aging demographic will need.

One way to avoid the impact of issues like this is to have a well-paid care-giving staff where the retention rates are significantly above the national average. At FirstLight Home Care, we find that when our caregivers are trained employees (not 1099 contractors), receive continuing educational opportunities and have benefits options, the retention rates soar.

Bill McPherson is the executive director of franchise development at FirstLight HomeCare, which has been awarded Entrepreneur Top 500 franchises, Top Franchisee Satisfaction, Franchise Business Review, Top Veterans Franchise, Franchise Business Review and Forbes Top Franchises. If you are interested in learning more about the Senior Care sector, he can be reached at bmcpherson@firstlighthomecare.com.

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