Agency Creep and How to Stop It

Agency costs are the leak that sinks supported living businesses.

Not the dramatic collapse — the slow, steady drain that starts as a short-term fix and becomes a permanent feature of the cost base. Agency dependency rarely arrives suddenly. It creeps. That is why we call it agency creep. And by the time most operators recognise it as a structural problem rather than a staffing inconvenience, it has already done significant damage to their margins.

Understanding Your Actual Agency Cost

The first step is measuring it precisely. Most operators know they are using agency staff. Fewer know exactly what their agency spend is as a percentage of total payroll — which is the only figure that tells you how serious the problem is.

The sector median is approximately 5% of payroll. At that level, agency cover is a normal part of managing absence and filling occasional gaps. Above 10%, it becomes a concern that needs addressing. Above 15%, it is an acute financial risk that requires immediate intervention.

Why does the threshold matter? Because agency workers typically cost 20 to 40% more than the equivalent employed worker, once the agency margin is included. At 15% of payroll, if your total employment cost base is £700,000, you are spending approximately £105,000 on agency. If you could replace that with employed staff at the same hours, the equivalent cost would be around £70,000 to £85,000 — a saving of £20,000 to £35,000 per year. In a sector where margins run at 7 to 8%, that is the difference between a viable business and one that is not.

The second measurement that matters is which sites and which shifts are driving the agency spend. Agency dependency is almost never evenly distributed across a provider’s services. It tends to concentrate in one or two sites, often those with higher turnover, or in specific shift patterns — nights, weekends, bank holidays — where cover is harder to maintain from the employed rota.

If you do not break your agency spend down by site and by shift type, you cannot target your intervention precisely.

The Real Causes of Agency Dependency

Agency creep is almost always a symptom, not a cause. The underlying drivers are usually one or more of the following.

Staff turnover is the most common. If you are regularly losing support workers and replacing them, you create persistent rota gaps. Agency fills those gaps. The cost of agency is compounding the cost of turnover. Both need to be addressed — but turnover is the root cause.

Rota planning that does not account for planned absences is the second most common cause. Holiday, training days, and predictable seasonal pressures should be built into the rota model in advance, not managed reactively with agency cover after the gap appears.

Pay rates that are not competitive with other local employers create both turnover and recruitment difficulty. This is a difficult conversation in a sector where LA rates are constrained — but if your employed rate is consistently lower than what comparable providers are paying, you will lose staff to them, and the agency cost will exceed the saving.

A bank staff model that is not being actively managed. Bank staff — your own people working additional hours on flexible contracts — can fill a significant proportion of the gaps that would otherwise go to agency. Most providers have a bank register. Very few actively recruit to it, actively communicate shifts to bank staff before going to agency, and track the proportion of gaps filled internally versus externally.

What a Good Agency Reduction Plan Looks Like

Start by knowing your current position. Calculate your agency spend as a percentage of total payroll for the last three months, broken down by site. This single exercise usually reveals that the problem is concentrated in a small number of services — and that the solution is targeted, not blanket.

For each high-agency site, identify the cause. Is it a turnover problem? A specific shift pattern that is chronically underfilled? A pay rate that is not competitive? A bank register that is not being actively used?

Then set a target and a timeline. Moving from 15% agency dependency to 8% over six months is a realistic goal for most providers who tackle this systematically. It requires active management of the bank register, a structured approach to retention, and rota planning that builds in cover for known absences.

Track it monthly. Agency spend as a percentage of payroll is one of the three key metrics in the Three Pressures™ framework covered in Packages, People, Property. If it is not on your management accounts every month, you cannot manage it.

The Tax Dimension

One further consideration: IR35 and employment status risk. Many supported living providers use workers who are nominally self-employed, either directly or through a personal service company. HMRC has been increasing scrutiny of employment status in the care sector. If support workers are working regular shifts, at your direction, in your services, they are very likely to be employees or workers — regardless of how they are contracted.

Getting this wrong can result in significant retrospective PAYE and NI liabilities. If you have any workers in this category, it is worth reviewing the arrangements with a specialist. The liability risk in this area is material for providers who have relied on this model.

How RDA Helps

We help supported living providers model their agency spend accurately, identify which sites and shifts are driving the problem, and build the financial framework for a structured reduction plan. We also advise on the tax and employment status risks associated with non-standard staffing arrangements.

If you want to understand your current agency position and what a reduction target looks like for your business, book a call with Dan Daly at supportedlivingfinancials.co.uk or email ddaly@rdaaccountants.co.uk.