Bitter pill

Published: 08/08/2002, Volume II2, No. 5817 Page 24 25 26

More than two years after the government proposed a radical overhaul of NHS pay, negotiations continue. And consultants have been offered a separate deal.

James Buchan looks at the proposals

Now it gets real. Agenda for Change, the new pay system for NHS staff, is shifting from being a behind-closed-doors subject for a few union officials, managers and civil servants to an issue that will touch the lives of all NHS workers.

Agenda for Change was first announced in early 1999, and joint agreement on the principles was reached in October 1999.

However, it is only in the past couple of months that it has started to become a reality for NHS staff.The phoney peace of over two years of preliminary negotiation is over and the details of a new system for 1 million NHS staff now have to be hammered out.

As HSJ went to press, there remain two important unanswered questions.Can the peace between the health departments and the unions prevail now that the medical consultants have been given a separate pay deal? And, more fundamentally, can Agenda for Change deliver on its key objectives of supporting the 'modernisation'of the NHS?

The time since October 1999 has been characterised by lowprofile but high-commitment discussions to reach agreement on the shape of the new pay system.We have now reached the next stage, where different jobs and occupations have to be priced.This is when it gets interesting - more difficult, more personal, and more public.Arcane details of job evaluation weightings are replaced by the all too real decisions of who gets what, in pay terms.

It was in everyone's interest in the first phase to reach consensus on an agreed structure.Having done so, the consensus agreement will come under pressure from organisational and occupational self-interest. The big question is who will be the relative winners and losers, in pay terms.

The first shots to disrupt the peace have been fired as a result of the separate pay award announced for medical consultants.

This has appeared relatively generous in the eyes of some of the unions representing other groups. It has also been taken by some as a government tactic to divide and rule the different professions, and therefore at odds with the initial aim of having a single 'holistic'pay system for all NHS staff.

When Agenda for Change was announced in 1999, the expectation was that it would be a universal pay system covering all NHS workers, in all occupations and grades. It was proposed that there would be three pay spines, one for medical staff, one for other NHS professionals (principally nurses, midwives and allied health professionals), and one for ancillary staff, administrative staff and so on.

The negotiations of the summer of 2002 have seen the medics peel away and settle in bilateral negotiations with the Department of Health.

Three pay spines have become two, covering the 'rest'- the 1 million nurses, midwives, allied health professionals, clinical scientists, administrative staff, support staff and others, still defined by what they are not in the archaic and inverted NHS language of 'non-medical workforce'.

The agreement of a new medical consultants' contract has upped the ante for the other unions.They are now under pressure to deliver something as good for their own members.

The negotiations are both about the size of the overall pie and who gets what chunk of it.The pie may be big, but it is not only about the size of your own slice. It is about whether you think that others have made off with more than they deserve.

Can Agenda for Change deliver against this backdrop of potential increased inter-union pressures?

All the parties involved in developing Agenda for Change were in agreement that it was needed because the current NHS pay system is outmoded. It does not encourage or support career development, it is not sufficiently flexible to meet varying labour market challenges, it does not enable the development of new roles and jobs, and it is unresponsive to the needs of the many low-paid workers in the NHS.

It is also inherently iniquitous.Legal challenges have already demonstrated that it does not comply with equal value considerations. In short, the pay system is broken and needs fixing.

The new system that has emerged from the closed-doors negotiations is underpinned by a single job evaluation system.

This should be some defence against equal pay claims and should facilitate the 'pricing'of new non-traditional jobs and roles.

The fact that one staff group, the medical consultants, have already had a separate offer means that maintaining pay equality across the different NHS occupations will be a greater challenge.The issue of pay linkage between different groups will now have to be agreed.There is also a need to determine the future role of the various pay review bodies.

The trick in agreeing and pricing the new system will be to balance management needs for local flexibility with union desires to sustain 'fairness' and a national powerbase - while also allaying Treasury concerns about the paybill getting out of control.

This tension has been apparent in the NHS for at least the past 15 years, with increasing demands for local flexibility to enable managers to respond more effectively to varying local labour market conditions.The Thatcher reforms of the 1990s touted local pay and performance-related pay as the way forward, but there was neither the funding nor the management capacity (or, in some cases, inclination) to deliver these initiatives.

This time around, the resources appear to be there.Can they be put to good use? Previous experience of public sector pay initiatives gives some pointers, and some warnings.

The last great national experiment with NHS pay was the introduction of clinical grading for nursing staff in 1988.

Despite delivering significant pay increases for many nurses, clinical grading was a public relations disaster.

The winners may have outnumbered the losers when all NHS nurses were re-graded in 1988, but there were tens of thousands of nurses who felt the scheme did not meet their expectations (which had been stoked up both by management and unions).

Variations in local interpretation and application of grading criteria did not help, and there were also accusations at the time that the DoH had underestimated the funding necessary to ensure the new pay system bedded down.

The clinical grading experience has a universal resonance.

Promise a new pay system which places greater emphasis on pay differentiation between individual or occupational winners and losers, and everyone assumes they will be one of the winners.The problem is that not everyone can have an aboveaverage pay increase. In the NHS, where staff have been conditioned over 50 years to expect collective national pay awards, this is not an easy message to sell.

Fast forward to 2002 for another lesson.Scottish teachers have a new pay system, much lauded when announced in 2001.The McCrone pay deal gave teachers in Scotland a new career structure, a three-year pay deal worth around 23 per cent, and the potential to become a 'super teacher'by achieving 'advanced chartered'status through developing additional competencies, with a related salary of up to£34,000.

When announced, this pay system was the envy of the English teaching unions.

The implementation of McCrone has had its share of teething problems.There have been accusations that some hard-pressed local authorities have diverted funding intended for teachers' pay to other deserving causes, and one of the unions argued that their members would have to pay up to£6,000 to undertake the continuing professional development necessary to reach superteacher competency.The employers have countered by arguing that teachers are not living up to the spirit of the new deal and are in effect 'working' the new system to reduce their hours at work.

Despite these difficulties, the new pay deal appears to be on track.The Scottish teacher experience reminds us that negotiating and agreeing an innovative new pay system is only a means to an end.

It has to be funded fully and implemented consistently if it is to achieve the objective of recruiting, retaining and motivating staff. It also flags up some other issues - the possibility of a three-year pay deal, and the scope for changing working practices through the implementation of a new pay system.

With these lessons in mind, where next for Agenda for Change? At the time of writing, final agreement with the unions had not been announced, but a timetable was being openly discussed and initial bargaining posturing was evident.

The timetable points to about 15 trusts being announced as early implementers by September 2002, with these trusts going live with the new pay system before the end of the financial year in March 2003.

In the meantime, co-ordinated training of managers and staffside representatives would get under way, underpinned by a team of internal consultants and a communication strategy.

Evaluation of the early implementers would be used to inform the roll-out of the new system to the rest of the NHS.This would probably be completed in 2005.

Some of the key negotiation pointers can also be discerned.

The bargaining position of the DoH is to buy out some of the extra allowances paid in different ways to different staff groups, agree a new way of rewarding staff who work unsocial hours, introduce recruitment and retention premiums for hardto-fill posts, challenge regional labour markets, and agree a standard working week for all staff.A three-year pay deal is also being flagged up - an attempt to buy stability until beyond the next election.

The unions have to reach an agreement where the buying-out of the various allowances does not disadvantage too many of their members, some of whom, particularly in low-paid occupations, rely heavily on allowances to earn a living wage.

They will also be only too aware of the size of the deal negotiated with the medical consultants Full agreement on Agenda for Change has not been reached, but already there are other NHS initiatives under way, outside its remit, which could have an impact on NHS pay.At best, these will parallel Agenda for Change; at worst, they could undermine the achievement of some of its objectives, if they are not all in alignment.

These initiatives are the foundation hospitals, the pilot work on team bonuses and importing clinical teams from Europe or US to undertake NHS work.Details remain sketchy, but it appears that foundation hospitals will have freedom to set pay at levels above the agreed national rate, using whatever resources they have generated through contracts.

This sounds like back to the future, and the era of the mid 1990s when NHS local pay was being pushed, unsuccessfully, by the Conservative government. The unions have already restated one of their key themes from that time - that the scope for local pay variation could distort local labour markets, with the foundation trust being able to pay over the odds to recruit and retain staff at the expense of trusts in the labour market.

Different approaches to team bonuses are being piloted in a number of trusts, under a DoH project. Some are pay related, some focus on non-pay incentives, but the key issue is that they have been introduced outside the remit of Agenda for Change. If any of these schemes looks like being a winner, and has scope for wider use in the NHS, the challenge will be to secure implementation in alignment with Agenda for Change.

Importing clinical teams to the UK from Europe and the US flags up another issue of pay differentials. If these teams are partially comprised of UK-recruited staff, what pay rates will they be on and will there be a distortion of some local NHS labour markets?

The long lead-in time for Agenda for Change has stoked up expectations. It has been held up as a solution to low pay, unfair pay differentials, poor career prospects, low morale and outmoded working practices. If it is to meet all realistic expectations it will have to be more consistently implemented and more adequately funded than some previous pay initiatives in the public sector.

It is over three years since Agenda for Change was first announced. On the basis of the likely target date for full implementation, we are over half way through the time available, but have barely begun to grapple with the realities of implementing the new system.

The next few months will be crucial to determining if these expectations are met, and if the pay agenda really is being changed for the better.

Key points

The government's proposal to produce a holistic pay system for the NHS has been limited by the separate settlement for consultants.

The new system must balance management needs for local flexibility and unions'desire to sustain national pay.

The introduction of foundation hospitals and overseas clinical teams will have implications for the implementation of the new pay system.

Professor James Buchan is professor of health employment research, Queen Margaret University College, Edinburgh.