NHS Direct has been fined £1.1m and issued with a contract performance letter due to its “consistent inability” to meet key performance indicators.

At the end of March, NHS Direct was failing 17 of its 30 key indicators.

Workforce was the worst performing area, with 23 per cent of new starters leaving within their first year, against an indicator of 15 per cent or less, and staff taking an average of 17.9 sick days compared with an indicator of 10.

The service also performed poorly against performance indicators measuring the time taken to carry out clinical assessments following less urgent and non-urgent calls.

NHS Direct chief executive Nick Chapman told directors at the most recent board meeting two weeks ago that performance had been affected by high demand at weekends.

He said lead commissioner NHS East of England was “quite clear we are on an improvement path” but “felt it was on them to raise concerns about our consistent inability to meet our key performance indicators”.

In 2011-12 the strategic health authority’s contract with NHS Direct includes an additional £1.3m of potential penalties for failure to achieve indicators related to weekends and holidays.

This is on top of the £5.7m of potential penalties carried over from last year, equivalent to 5 per cent of the contract value.

In a bid to tackle poor call back times at weekends, NHS Direct – which hopes to become a foundation trust in 2013 – has increased the number of weekends its nurse advisers work.

However, the Royal College of Nursing has lodged a grievance against the changes on behalf of about 40 of its members, which is due to go to a stage three hearing soon. This will involve the RCN making its case to a panel of NHS Direct executive and non-executive directors.

NHS Direct chief nurse Tricia Hamilton said the rota changes were needed to cope with weekend demand.