We must resist the siren voices to achieve pay reform
It is not unusual for public sector employers to recommend wage restraint.
However, there is an important and significant difference about the recommendation made by NHS Employers that the pay freeze for NHS staff should be extended into a third year. For the first time, the body representing all major NHS employer organisations is placing affordability at the centre of its argument. Put simply, it is saying that - when all the pressures on the NHS are taken into account - the service cannot afford to pay its staff another one per cent without potentially compromising the quality of patient care. While NHS Employers is an independent body, it is funded by the Department of Health and it is very unlikely to be sending such a strong and contentious message without having checked with its paymasters first.
The warning arrives at a febrile time. The Kings Fund has warned of the need to better understand the pressures the £20bn efficiency programme is placing on the NHS, while the debate grows over whether the Chancellor will use his December autumn statement to alter his hard line on public spending.
But the key to understanding the NHS Employers warning over pay is the tensions created by negotiations over flexing terms and conditions set out under Agenda for Change. Even when pay is “frozen”, NHS Employers claim pay bills rise by an average two percent as a result of “increments” awarded under AfC.
The flagship employment reform of the last decade has - despite its many strengths - fallen into some disrepute as salary rises meant to reward increased experience and skills have too often been handed out regardless of progress. This outcome is as much to do with employer’s failure to manage the scheme correctly.
As HSJ has reported a “pay cartel” of 20 trusts in the South West have decided to break away from AfC. The unions have reacted furiously and are threatening to pull out from national pay talks.
This is a high stakes game. At a national level there is a high degree of pragmatism among the leadership of unions and employers, who both understand, to varying degrees, that change is inevitable. But both also have memberships containing a significant element itching for a fight. The win-win for both parties is the quiet demise of the south west cartel amid national compromise, but that outcome is far from certain.
NHS Employers director Dean Royles says the time has come from a major debate on NHS terms and conditions. He writes: “Skill mix, ways of working and extended working days will require new processes and systems and change the way we train and educate staff.”
To have this debate and to reach a sensible conclusion while maintaining staff commitment will require the wisdom of Solomon. Siren voices will be heard on all sides. How, for example, new hospital consultants in Ireland are facing a 30 per cent pay cut or how widespread industrial unrest can be used to unseat the government’s NHS reforms.
Key is identifying solutions which deliver efficiencies, but also offer staff something in return. If, for example, staff are asked to work longer hours for the same pay they should expect to enjoy some job and role security. If they flex their roles to enable new, more effective service models they should receive the necessary training and, perhaps, enhanced reward.
Most important of all, it is vital the great majority of savings are perceived by staff as being reinvested in the NHS. If the proceeds of efficiency are regularly siphoned off to “national risk pools” or to service the national debt reform will be still born.
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Readers' comments (6)
Sunita Berry | 4-Oct-2012 1:25 pm
But the savings are already being siphoned off. The £20bn figure remains the same and has done for two years despite significant sums being taken off by the Treasury. So the idea of reinvestment into the NHS is illusory. And those that call for pay restraint seem not to be able to concede that in fact pay for ordinary people over the last 30 -40 years has hardly increased at all and debt has been the compensatory mechanism for households to off set the miserly attitudes of employers. The corrosive narrative of private wage restraint with extravagant public pay is only the latest a long line of bogey-men stories concocted by governments to divide and rule - to keep elites in place an well funded.
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Anonymous | 5-Oct-2012 10:49 am
Given the scale of savings required there is going to have to be local pay arrangements and the impact of these will have to be to significantly reduce the pay bill. Its 101 economics. We are paying ourselves too much relative to our economic circumstances. The only reason it hasn't happened already is a mixture of cowardice by Boards aided by them being shielded from the reality of the debt many of them have, and many more are about to get into.
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Anonymous | 5-Oct-2012 2:09 pm
But - dare I say this - if you look back in history at all the results of regional vs national pay in a range of sectors and not just the NHS, we should be careful what we wish for. Local deals don't always mean a lower pay bill. And if we're asking people to work harder for longer with e.g. more frail elderly and so on - is tackling pay without considering incentives the best way to start? It's not enough to say that there isn't any money, we've all got to tighten our belts - unless we properly look at what we're asking people to do. Would you want unhappy demoralised staff run ragged looking after your family? We all know some abuse the system but it's so much more complex than cutting T&Cs and headcount. Or am I hopelessly naive?!
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David Dalton | 6-Oct-2012 3:28 pm
Dear Alastair, I have commented on this issue several times before and am very clear that Boards have failed to understand the importance of aligning an individual's contribution to the organisation's goals, objectives and values. This alignment should be reinforced by the pay system. In most organisations we have a 'disconnected hierarchy' where a Board is lucky if its Annual Plan penetrates more than 2 levels into the organisation. As a consequence there is an inability for staff and their leaders to unite around a common cause. Pay should be used to remunerate and compensate an individual's contribution and application of their skills, experience and hopefully, their discretionary effort. This discretionary effort can not be commanded by Boards, it has to be freely given by staff who see the connection between what they contribute and a fair system of reward. The continued practice of Boards to 'reward' their staff through annual increments without due regard to assessing their contribution to the organisation's priorities is a practice that not only feels increasingly odd, but should be regarded as poor management. In my Trust the assessed value of incremental pay rises averages over 3%. This is not an insignificant amount and good fiduciary stewardship of its use should be exercised by Boards. I believe strongly that staff should be able to access this nationally agreed amount, if they have demonstrated a satisfactory contribution to their local organisation. I think that the current debate on pay misses the point: we should have a national pay system and staff should have access to pay increases related to the extent to which they demonstrate, locally, their contribution to goals and values, rather than just accessing an incremental pay increase on the anniversary of their appointment. Calling for a wage freeze and then accepting a system which continues to provide incremental pay for no return - means that employers are missing a huge opportunity to reform their own practices and provide real reward for staff. Introducing new assessment systems take time and requires sensitivity to staff's understandable anxiety about change. The rewards though are potentially huge and would far outweigh the savings that a pay freeze would bring for another year.
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Anonymous | 8-Oct-2012 2:07 pm
I would like to see this debate incorporate the very senior management pay and rewards. the 2 teir system is similar to the banker bonus for the boards....all a mystery. Will the VSM be reviewed and decreased locally if the local A4C wage is decreased????
Please focus on the entire picture!
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Anonymous | 9-Oct-2012 1:05 pm
It is worth noting that Irish consultant starting salary is £140k per annum compared with £74k in the UK. I find it hard to justify the similar reduction of 30% in salary could be applied in the UK.
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