How Much Should You Be Paying Your Caregivers?

Home Care Office Staff Hiring Tips

Understanding what the competition is paying caregivers will help you make the most informed decisions to stay competitive in hiring the best talent.

In any discussion on caregiver turnover, there’s an elephant in the room: the fact that one of the most effective long-term strategies to increase retention and hire better talent is simply paying caregivers more. While it’s not in the cards for most agencies to simply start paying caregivers significantly more without charging clients more, it’s important to track what competing agencies and other sources of competition are offering and frequently evaluate whether it’s time to increase your wages to stay competitive.

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What are the advantages of paying caregivers more?

Besides making your caregiver recruitment efforts more competitive, paying more can save you money by reducing turnover costs. The average caregiver costs a hefty $2,600 to replace. Hidden and indirect costs add significantly to the cost of constantly hiring new caregivers. Long term, raising caregiver pay may be the one of the best things you can do to stay financially even.

This data from the 2021 Home Care Benchmarking Study shows the effects of increasing wage on turnover:

There’s a strong correlation between turnover and pay, which generally seems to hit diminishing returns a couple dollars above the industry average. If you’re an agency with 100 caregivers, 55% turnover vs. 85% turnover means a difference of 30 fewer caregivers leaving each year, or a whopping $78,000 in estimated turnover cost savings.

Are you paying your caregivers competitively?

While it can be difficult to determine exactly what your local competitors are paying, you can get a strong idea of the ballpark you should be in by using benchmarking data. Here’s some more very useful data from the 2021 study showing median hourly pay ranges:

pay ranges

Obviously, geographic location makes a significant difference in what kind of pay can be expected. Here’s the median hourly wages for caregivers classified as companions/homemakers by region:

  • Northeast: $13.00
  • Great Lakes: $12.50
  • South: $11.00
  • Central: $12.00
  • Pacific: $15.00

It’s also interesting to note that the turnover rates in these regions correspond strongly to how much they pay caregivers. For more data—including region-specific data for other types of caregivers, regional turnover rates, and information on 24-hour shifts and overtime pay, purchase a copy of the 2021 Home Care Benchmarking Study.

Let’s shift gears and talk about caregiver benefits.

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Benefits that Home Care Agencies are Offering to Caregivers

Benefits can be a useful way to increase the competitiveness of your compensation package without adding too much cost. While smaller agencies have less leeway than larger agencies to offer heavy-hitting benefits like insurance plans, every agency should carefully consider options and evaluate which benefits they’re able to offer. For instance, a small agency that is well-connected in their community might be able to offer a variety of discounts and perks at local businesses for relatively little cost. In addition, home care agencies should strongly consider offering benefits like sick days and paid vacation time.

Another option for employee incentives is to offer a referral bonus program. Any referrals that lead to hires will be extra income in your employee’s pocket. Caregivers always know other caregivers. This method is a great recruiting tool and gives current employees something to strive for.  

Here’s a list of some of the benefits being offered by different agencies throughout the country. For a more complete list, see 47 Ideas For Employee Benefits For Caregivers. 

  • 1.5x pay on holidays

  • Paid vacation and sick leave

  • Training and advancement opportunities

  • Discounts at local businesses (movie tickets, oil changes, gym memberships, haircuts, items at restaurants, etc.)

  • Mileage reimbursements

  • Performance bonuses

  • Longevity perks

  • Paid overtime

  • Employee appreciation events

  • Paid time off to volunteer

  • Tuition assistance

  • 401(k) match

Investing in Your Caregivers

A good retention strategy relies on a variety of factors including strong training programs, frequent recognition, and good communication among others. One of the most important ingredients in this mix is competitive compensation. While wages and benefits add significant cost (caregiver wages account for over half of the average agency’s expenses), it’s important to recognize the value of investing in your caregivers. Beyond reducing turnover costs, providing competitive compensation will help you attract better caregivers, raise morale, and result in better care for your clients. Evaluate what your agency can afford to offer, but remember that it’s also an investment.

It’s a domino effect. There is a chain reaction when you increase wages; caregivers become happier and are more on top of their work, leading to satisfied clients who will recommend and continue using your services.  

What have you done to stay competitive? Let us know in the comments!

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