Trusts across Liverpool are pulling out of a “landmark” £27m deal to buy their payroll and recruitment services from outsourcing giant Capita, fewer than three years into the seven-year contract.

At least five out of eight North Merseyside providers that transferred services to Capita in 2012 will have brought them back into the NHS, or moved to other providers, by 1 August, according to statements given to HSJ.

The premature exodus of trusts from the contract follows reports of widespread concerns about the quality of the service Capita HR Solutions provided.

Two providers - Royal Liverpool and Broadgreen University Hospitals Trust and neurosciences specialist Walton Centre Foundation Trust - confirmed they had already ceased to receive any services under the Capita contract.

Mersey Care Trust, Liverpool Community Health Trust and Aintree University Hospital FT will pull out of the deal by 1 August, according trust statements. Alder Hey Children’s FT said it was “currently reviewing its deal with Capita”, while Liverpool Heart and Chest Hospital FT said it was “in discussions with Capita about performance”.

Board papers published by Royal Liverpool in February stated that an initial “informal letter of concern” about the Capita services was sent collectively by the North Merseyside trusts in March last year, but “no significant improvements were seen within three months”.

After receiving a formal letter of concern in June 2013, Capita produced a “further service improvement plan”. However, the papers stated that “despite this plan, further significant pay problems” were experienced by “the majority of staff within the trust”. Further letters of concern were issued to the company in November and January, the papers continued.

The Royal Liverpool transferred its payroll contract to St Helens and Knowsley Teaching Hospitals Trust in April, and brought its recruitment back in-house in June.

The trust said in a statement that “because of the complex nature of some of our terms and conditions, the trust and Capita have mutually agreed to end this contract”.

When Capita’s HR business won the North Merseyside contract in 2011 it hailed it as a “landmark agreement” which marked “the first time NHS trusts have come together in this way to collectively outsource their HR, payroll and recruitment functions”.

The company set up a new shared service centre based in Liverpool, and estimated at the time that around 150 NHS staff would be transferred to Capita under the contract.

A Capita spokeswoman told HSJ this week: “Following a joint review of recruitment, payroll and HR processes, Capita and a number of trusts in North Merseyside have mutually agreed that Capita will no longer provide these services.”

She added that “Capita remains committed to providing its broad range of services to the NHS.”

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