How much should I put my fees up by this year?

It is one of the biggest questions a care owner faces each year, and the honest answer is that there is no right percentage. The right increase for your business depends on what your care will cost next year, how full you expect to be, and who pays for each resident or package.

What you can do is work it out in a way that you can stand behind when a family or a commissioner asks why.

Start from next year's cost, not this year's fee

Most fee increases are set by looking backwards: last year's fee plus a bit, or whatever the home down the road is doing. The problem is that your costs don't look backwards. The pay rise, the pension and National Insurance changes and the insurance renewal all arrive in the year you are setting the fee for.

So start with next year:

1. Take this year's costs and add each increase you know is coming in April, line by line.
2. Divide by the number of beds you realistically expect to fill, or the hours you expect to deliver. Not the number you are registered for.
3. That gives you next year's cost per occupied bed or per hour.

Add what owners usually leave out

Before you compare that cost with your fee, check two lines are in it: a realistic amount set aside for repairs and refurbishment, and a fair return for you as the owner. If either is missing, the business is being quietly subsidised by your building or by you.

Then look at who pays what

Compare your cost with what each funder actually pays: self-funders, the council, the NHS. If some placements pay below cost, you need to know by how much, because it changes both your fee conversations and which new placements you accept.

Check your contracts before you announce anything

Your contracts with residents should say when and how fees can change, and how much notice you must give. Read them before you set a date. It is also worth checking your terms against the Competition and Markets Authority's guidance on consumer law for care homes.

Explain it plainly

Families accept increases far more readily when they understand them. Explain what has gone up and why, in plain terms, rather than just sending the new figure. And make sure the fee you quote to new admissions already reflects next year's cost.

Do it in the winter

The best time to work this out is the winter before April, while there is time to give notice, prepare your case for the council, and plan for the year. Leave it until the spring and you are setting fees in a hurry.

If you'd like to work through your own numbers, my free checklist What does your care really cost? takes you through it step by step. Or see how Danny helps with fees and the true cost of care.