News analysis: Paying it forward

The announcement in March that the government and union leaders had agreed a proposed pay deal for Agenda for Change staff in England came with much fanfare. The pay ceiling placed on around 1 million NHS staff since 2010 had been lifted, and most unions, employers and ministers highlighted the potential increases in earnings of between 6.5% and 29% over the next three years. But, with unions currently consulting their members on a deal costing £4.2bn, not everyone is happy.

That said, 13 of the 14 NHS unions with members on Agenda for Change contracts have recommended the new pay framework to their members. Only the GMB has rejected it, declaring it a ‘jam tomorrow’ pay offer.

Around half of Agenda for Change staff are at the top of their pay bands, according to the framework, and they would receive pay rises totalling 6.5% over the next three years (backdated to April 2018). This would include a 3% increase in 2018/19; 1.7% in 2019/20; and 1.67% in 2020/21.

In 2019/20, staff at the top pay point in bands 2-8c will receive an additional unconsolidated lump sum of 1.1%. Those at the top of higher pay bands will receive a lump sum equal to the value given to those in 8c (around £800).

The GMB said the proposed 6.5% rise amounted to a pay cut – the Office for Budget Responsibility forecasts one measure of inflation (the retail price index or RPI) will increase by more than 9% over three years.

It should be noted that there is some debate about measuring inflation, with the unions preferring RPI and the Department of Health and Social Care favouring the consumer price index (CPI), which could be closer to 6% over the three-year period.

Kevin Brandstatter, the GMB national officer, claimed the drop in earnings was on top of eight years of pay caps that has cost paramedics, midwives and nurses thousands of pounds. He said: ‘This deal won’t allow them to claw any of that cash back – in fact, for longer serving, most loyal NHS workers the 6.5% increase over three years actually means a real-terms pay cut. It does nothing to address the recruitment and retention crisis that is driving workers from our NHS and has left 100,000 positions unfilled.’

While there is consternation in some quarters about the level of pay rises for those at the top of their band, the headline increases in pay of up to 29% has also caused much indignation, particularly on social media.

The issue is how the rises have been calculated and shown in the framework document. A table in the individual pay journeys section shows the potential earnings gain for each pay point over the three-year period. However, the earning gains include pay progression, even though these would not be automatic under the proposals (more about this later).

As a result, a person in band 6 on pay point 24 would see their earnings rise by 14.02% over the three years to 2020/21 – pay journeys published on the NHS Employers’ website show their salary would rise from £29,626 to £33,779.

However, under the current system, it would rise to £33,723, assuming they received all three annual incremental pay awards and assuming a continuation of the 1% pay cap. Critics said there was little difference in this.

That’s not to say all gains would be this low. A band 7 on pay point 26 (the pay point due to see gains of 29%) would see their income rise from £31,696 to £40,894 in the proposed system. In the current system, their pay would rise to £36,655 over three years.

As noted above, there will be changes to pay progression (annual increments). Since 2013, pay progression has not been automatic, but subject to criteria set by each employer and linked to annual appraisals. Anecdotally, issues with recruitment and retention have led, de facto, to progression being automatic.

However, though the framework insists automatic progression would end, it is expected staff will progress through the pay-step points – employers would be required to budget based on this expectation. Progression would be linked to the satisfactory completion of the appraisal process and mandatory training. Local standards must be met and there should be no formal disciplinary action live on the staff member’s record. The deal would introduce minimum time periods staff must remain at a pay point. 

The pay-off would be faster progression through the bands compared with the current system, particularly for the lower paid. This would be achieved by reducing the number of pay points in each band.

Given the current economic climate and ongoing uncertainty, is this the best deal that could have been achieved? Is the new minimum basic pay of £17,460 in 2018/19 (rising to £18,005 by 2020/21), benefiting 100,000 staff, not a huge step forward?

Unison thinks the deal would make the NHS pay system ‘fairer and better’ for current and future staff. It pointed out there would be no fundamental changes to unsocial hours payments and no change to leave entitlement. Just before the deal was announced, there were reports that the government had insisted staff should lose one day of annual leave in return for the pay rises.

‘We think this offers a better alternative for members – and more certainty – than waiting around for the pay review body to make recommendations each year,’ said Sara Gorton, Unison’s head of health.

The deal would benefit the NHS, chiefly in terms of recruitment and retention, said Phillippa Hentsch (pictured), head of analysis at NHS Providers. ‘Our most recent workforce report, There for us, showed that pay restraint had begun to bite in terms of recruitment and keeping staff within the NHS,’ she said.

‘More than one in three (38%) of trust leaders cited pay and reward when asked about the biggest challenges to attracting and keeping staff. Alongside this, as seen in the latest NHS staff survey, only 31% of staff said that they were satisfied with their pay.

‘Although pay is only one part of efforts to make the NHS a great place to work, lifting the pay cap will send an important signal to a workforce that remains overstretched.’

She added: ‘It is important to remember that there are other factors that will play a part in the wider strategy to improve staff retention. Work-life balance is still the fastest growing reason behind staff choosing to leave.’

Ms Hentsch said there could be potential savings from reduced recruitment costs and lower agency spending, with more staff staying in or joining the NHS workforce.

An NHS Employers’ spokesperson said: ‘Higher starting salaries in all pay bands will help recruitment and career progression. Increases at the bottom of the pay structure will future-proof the NHS against increases in the statutory living wage and help the NHS maintain a market advantage at that level.

‘The reform of the pay structure has been a longstanding shared objective with the NHS trade unions. The new simplified structure better reflects the needs of the service now, rather than the existing structure, which has largely been in place and unchanged since 2003.’

One of the key benefits to employers is that the deal is fully funded by the Treasury rather than existing NHS budgets.

Ms Hentsch said: ‘Given the financial pressures facing NHS trusts, it is imperative
that they are not left to foot the bill. We have since had assurances that community-based and local authority contracted Agenda for Change staff will also receive the benefits of this deal. Clearly, further detail is still required about how the £4.2bn cost attached is made up, and whether this has implications on national insurance and pension costs.’

She added that providers will be watching closely for the next pay rise for doctors and dentists. ‘The doctors’ pay review body is currently preparing a report and a  recommendation on doctors’ pay,’ she said. ‘Should the review body recommend an increase above 1%, we are clear that this must also be fully funded by the Treasury rather than it being a further cost to be absorbed by trusts. We now need to see quick progress towards a settlement for doctors.’

Providers will also be waiting to see how the funding to cover the pay rises is allocated in the current financial year – should the deal be accepted by the union members.

If it is accepted, the new pay rates will begin in October and be backdated to the beginning of the financial year.

A recent NHS Improvement circular on planning for 2018/19 told trusts not to attempt to reflect the impact of the potential deal (over the assumed 1% rise), when putting together financial planning submissions due on 30 April.

It said: ‘Any additional cost arising from an agreed pay award that is higher than this planning assumption will be fully funded and therefore will have a nil impact on their financial position.’

Ms Hentsch insists the funding should be paid directly. ‘We have strongly argued that the pay award in 2018/19 should be transferred directly to employers. We understand the Department of Health and Social Care, NHS Improvement and NHS England have agreed to this, but agreement for how the funding will be allocated in future years is yet to reached.’

NHS pay has never been simple and, although the proposed deal will simplify some elements of the system, it may be a few years in operation before it is well understood by employers and staff.