Very senior managers in the NHS will have their ability to earn bonuses on top of their pay restricted for the second successive year.

NHS chief executive Sir David Nicholson has written to strategic health authorities, primary care trusts, ambulance trusts and special health authorities to set out restrictions on staff covered by the very senior manager pay framework.

Performance payments will again be restricted to the top 25 per cent of performers classified as very senior managers in each trust, with an upper limit preventing any individual from getting a bonus of more than five per cent of their reckonable pay.

Reckonable pay includes basic salary, additional responsibility payments and recruitment and retention premiums.

PCT clusters will be classified as one organisation for the purpose of the exercise in order to prevent them from having three or less very senior managers and being unable to restrict bonuses to a quarter of them.

Other bodies, such as special health authorities, with three or less very senior managers, will be able to put only one manager forward for a bonus.

There are approximately 770 managers subject to the VSM pay framework in the NHS.

Individual remuneration committees will make recommendations on which managers should get bonuses. Committee recommendations must be approved by “grandparent organisations” up the NHS chain, which will convene a special pay committee if required.

Only managers deemed to be either outstanding or to have exceeded expectations will be considered for a bonus, Sir David said in his letter.

“I am asking organisations to ensure that, whatever the process locally, recommendations to pay awards to no more than 25 per cent of staff in each group are submitted to the grandparent organisation no later than the end of June,” he added.

The Department of Health will be issuing a revised version of the very senior manager pay framework to include pay arrangements for VSMs in SHA clusters.

Following the government’s announcement of a public sector pay freeze for anyone earning over £21,000, very senior managers subject to the pay framework will continue to have pay frozen in 2012-13.

Remuneration rates for non-executive board members were also frozen for two years from April 2011.