Most authorities in England are paying less than the industry recommended rate for personal homecare - including Lancashire County Council.
The UK Homecare Association (UKHCA), which represents providers, wants them to be paid a minimum of £15.19 an hour, to cover staff wages, training and travel.
But a Freedom of Information request revealed the minimum paid met that rate in just four out of 101 responses.
Lancashire County Council buys most of its homecare at £11.96 per hour, but was found to be paying just under £9 in a minority of cases.
One provider said the “quality of care and dignity of older people” was being squeezed out by low rates.
Gary Farrer, managing director of SureCare, which has franchises in Preston and South Ribble, said his firm had diversified into other areas of care, in part because of “poor fees” from councils.
He said: “This investigation confirms what providers within the sector have known for some time, namely that the contracts being offered by certain local authorities are simply unsustainable.
“Rather than cutting the quality of care available to our elderly, we should be investing in them similar to other countries in Europe.”
Homecare services are paid for by councils and often delivered by agencies to the elderly and younger disabled adults, if they qualify through a means-tested assessment.
They include help with activities such as washing, dressing and eating.
The average rate paid by councils was £12.26 an hour.
But one carer working in Preston said the recommended hourly rate of £15.19 “should be set in stone”.
The employee, who did not wish to be named, said: “Out of £11.96, the providers have to pay medical, moving and handling and hygiene training, your travel and fuel allowance, and the council wants them to pay a Living Wage of £7.45 too. So it’s very tight.
“When you think of it, £11.96 is nowhere near enough to ensure your service users get a quality service.”
County Coun Tony Martin, cabinet member for adult and community services, said: “The £8.98 hourly rate is paid in fewer than a dozen cases out of more than 5,000 people whose homecare we commission.
“This is an anomaly dating back several years and we are correcting it to the proper rate.
“We buy in most of our homecare at a rate of £11.96 per hour, or £6.93 per half hour.
“Both of these rates allow for up to 10 minutes’ travelling time, which means visits last for at least 50 or 20 minutes, depending on individual needs.
“We are currently working closely with homecare providers with the aim of setting up new contracts across the county by September.
“The new contacts will help to set clearer, higher and more consistent standards, together with improving staff training, reducing travelling times and allowing providers to move towards paying a living wage.”
The council is already looking at reducing the number of companies it uses to give domiciliary support to nearly 5,600 people.
These services are provided by a mix of 129 local and national, private and not-for-profit organisations, employing some 4,500 staff.
County Hall chiefs want to reduce this number to around 30, which they say will help ensure consistently high quality support, minimise staff travel time and lead to better terms and conditions for workers.
Providers will be invited to tender for a position on a new ‘preferred providers’ list, and to submit their own price, once a consultation has concluded.
But critics of the move believe smaller groups with a “tried and tested” record of providing excellent care will be unable to compete with large agencies, and could even go out of business.