Cherished perks for NHS staff such as workplace nurseries and subsidised canteens could be the first thing cash-strapped employers look to cut. Alison Moore investigates

  • NHS employers will be looking for savings on staff costs - but room to cut wages is limited.
  • Perks such as cheap staff parking and workplace nurseries could be targeted for cuts.
  • Trusts will be keen to avoid the debacle of 2006 when frontline staff were laid off.
  • As NHS spending is fixed till 2011, trusts have time to prepare - and find new ways of working.

Collectively NHS organisations make up Europe’s biggest employer. And while NHS employees have never been among the country’s biggest earners, they have enjoyed other benefits - a generous pension, considerable job security, and an increasingly family-friendly atmosphere. The NHS has tried to be the “employer of choice” for potential staff, especially when recruitment has been difficult.

But will the coming financial pressures affect this? NHS Employers director Sian Thomas says the way ahead for the NHS won’t be “salami slicing” the workforce through lay-offs but looking to harness the enthusiasm and innovation of the workforce to do things differently.”

Nonetheless finance directors will be scrutinising each pound of spending on workforce and asking whether it can be justified. But their room for manoeuvre is likely to be limited.

While some private companies have asked staff to take pay cuts, usually with reduced working hours, such a move would not be possible in the NHS. Even if it were possible to unravel pay deals, there is little evidence that ministers want to do this. Obviously, pay from 2011 onwards is likely to be fiercely fought over with employers looking for low rises; the real terms rises of the last decade are unlikely to be repeated.

Pension costs too are difficult to cut. The NHS scheme was only recently revised. While it could be renegotiated this would only affect costs in the long term: existing commitments through pension rights built up by employees would have to be honoured and, in the short term, these are the vast bulk of the costs.

So that leaves just the numbers and grades of staff - and any additional costs around employment, which the employer can control. Josie Irwin, head of employment relations at the RCN, says she expects other aspects of the employment package beyond pay and pensions to be affected by the straitened circumstances.

Pressure on workloads

Many people expect pressure to raise productivity: getting the best out of staff rather than simply working them harder. This may include using cheaper staff for some tasks. “The way we will get through these challenges will be by harnessing the optimism and innovation of the people who work for us,” says Ms Thomas. “The strength of the NHS is that we have a massive engagement programme already.”

But even this may not deliver the savings needed and she admits there could have to be a contraction in the workforce.

Tracy Myhill, past president of the Healthcare People Management Association, says: “Previous absolute guarantees of no compulsory redundancies for NHS staff cannot be sustained.” But she believes the NHS will try to retain skills and experience whenever possible; in Wales, where she is director of workforce and organisational development at Cardiff and Vale University Local Health Board, no significant redundancies are expected. With a turnover of 250,000 people a year in the NHS, there will be chances to restructure the workforce over time.

Some groups of staff are already in short supply or will see increased demand for their services: midwives, for example, are already a shortage specialty and hard to cut when women keep on having babies.

But other areas may be more vulnerable: could more administrative work be outsourced to reduce costs, for example? It’s also possible trusts will look to make ad hoc savings such as leaving vacant posts unfilled for longer than usual or cutting back on bank and agency staff (a number are trying to cut back on recent high spending, and some are cutting back on overtime). “There should definitely be a focus on reducing agency costs and overtime costs to ensure we protect our substantive workforce,” says Ms Myhill.

These measures can bring immediate savings but do lead to extra pressure on remaining staff. A Royal College of Nursing survey in 2007 showed that 55 per cent of nurses felt they were unable to deliver the quality of care they wanted to because of their workload. Ms Irwin cautions that fiddling with workloads could cause this figure to rise.

“There is always a danger that organisations looking at deficits go for slash and burn, cheap, salami slice cuts,” she says. “That means a big challenge for the trade unions and the RCN. We need to make the link between a good quality work environment and quality nursing.

“The hidden danger is an impact on morale and motivation. Staff feel less valued and are not able to deliver the quality care we would like them to.”

Flexible working

But will staff be expected to work differently? Inevitably some will - especially as many organisations now talk of providing services 24/7. “Employees will see a change in the shape of the workforce with role design across patient pathways, across functions and across other public sector organisations,” says Ms Myhill. “Twenty-four hours a day, seven days a week working will be necessary.”

This is likely to be a challenge both for managers, who will need to fill increasingly complex rotas, and for staff, some of whom will dislike the changes.

Kate Moran, head of employment research at the Chartered Society of Physiotherapy, says: “You could see flexible working as something that could increase flexibility for employers but it has to be something staff are happy with.” This will be a challenge for the NHS as a family friendly employer: over the last decade it has transformed its reputation on this, so much so it was named as a “top 20” family friendly employer earlier this year.

One of the motivations for this change was attracting and keeping staff at a time of scarcity, although the NHS, like other employers, now has a legal duty to consider flexible working requests from some staff.

No one expects this to radically change, but there could be pressures which may mean employers look for reciprocal flexibility from workers. “There is a great demand in the NHS workforce to balance work and life,” says George Georgiou, employment relations adviser at the Royal College of Midwives. “Flexible working does not cost any more and leads to a happy workforce, and people who stay in the workforce. There are much bigger issues than the Improving Working Lives agenda that could deliver more savings.”

Unhappy families?

Mike Jackson, senior national officer for health at Unison, points out family friendly policies reduce trusts’ bills for recruitment as staff are more likely to stay put.

But greater competition to provide services and pressure to hit access targets could make flexible working more difficult to accommodate: term-time only contracts, for example, could make it difficult to provide consistent cover in a permanently busy environment. And the NHS will be looking for many more staff who are willing to work evenings and weekends, which can interfere with family life.

But could some of the costs associated with being a “good employer” come under scrutiny? Workplace nurseries, for example, are often subsidised (either explicitly, or through providing space). Most trusts would say they are committed to workplace nurseries but a number have closed over the last two or three years, and finance has sometimes been an issue. At University Hospitals Bristol Foundation Trust, a review of the future of the hospital nursery, including its financial viability, is being conducted this autumn: the nursery was due to close but was given six months’ reprieve after staff expressed concerns.

Other parts of the public sector have seen nursery provision cut as finances tighten: a number of universities are closing subsidised nurseries, for example.

While many nurseries will continue, it may be that boards look harder at the costs and whether parents should pay more. The same may be true for other staff facilities which are subsidised by the trust or provided free of charge, such as restaurants and car parking. NHS Greater Glasgow and Clyde recently decided to cut hours at its staff dining rooms to reduce the £2m subsidy it provides.

Trusts and PCTs in England already make at least £28m a year from staff parking charges and in some trusts this has risen rapidly in the last three years.

Training budgets were particularly hard hit in 2006, as they were raided to make the books balance. Ms Thomas says some private companies have responded to the recession by increasing training and development spending. Ms Myhill argues that in this climate training and development should have more significance, rather than less, as it enable staff to broaden their skills and develop their roles.

However, there is a risk some organisations will see training as an easy target for short term savings. With organisations looking to tighten their financial control across all areas, any discretionary spending, such as attendance at conferences, may be carefully scrutinised.

One area where the NHS is making substantial investment is staff wellbeing. The Boorman review interim report into health and wellbeing among NHS staff recently argued there is a strong business case for this. Some NHS organisations are now offering staff complementary therapies, for example - perhaps ironically as they would be unlikely to fund them for the public.

One complementary therapy group, Ethos, has been working with a PCT, which it will not name, offering taster sessions for staff, including aromatherapy, reiki, massage and thermo-auricular therapy - or ear candles). A spokesman for the firm involved said: “We felt that the service provided was motivational because it helped staff feel valued by their employer, who had demonstrated their commitment towards the workforce’s health and wellbeing by investing in the service.”

Staff at some hospitals also have access to on-site leisure facilities. At Portsmouth Hospitals Trust nearly £3m has been invested in a wellbeing centre, with gym, counselling and complementary therapies, for hospital staff. It is due to open next year. An area for savings? Probably not given the increased emphasis on support for employers working in a stressful and pressurised environment; but like all spending employers may be looking for evidence it is helping organisations ultimately deliver better care.

No one expects a change of government to make much difference to the financial position of the NHS and there is little indication the Conservatives plan dramatic policy shifts if elected, although they have made some noises about public sector pensions. But if they opted to open up healthcare to private providers, Mr Jackson fears that wages in those new providers could be lower. He points to social care where around 80 per cent of contracts are based on staff getting the minimum wage, as councils have taken on a commissioning rather than a provider role.

Threat to wages

At the moment the government expects private companies doing NHS funded work to provide broadly the same employment package as the NHS. Where the private sector takes over NHS work, staff are protected through TUPE. And the government has actually put money into the system to ensure that ancillary staff provided by PFI contractors get a reasonable level of pay. Anecdotally, the cost of employing staff at broadly comparable deals to the NHS puts off some private companies from chasing public sector work.

But if there was more of a market for healthcare this might not continue under a new government. Healthcare professionals are unlikely to be affected - the NHS would always be a dominant employer, effectively setting a wage standard - but other staff could be vulnerable.

“The danger is you go for a lowest cost contract,” warns Mr Jackson.

Lessons from the last cuts

The NHS has learnt a lot from the debacle of 2006-07, when many trusts cut jobs in an attempt to balance their books, while the mergers of PCTs and SHAs also resulted in some job losses. Although it is hard to establish how many employees were actually made redundant, the NHS workforce did fall by 11,000 in the last quarter of 2006.

A glut of announcements created the impression that trusts were cutting frontline staff haphazardly and later needed to recruit to fill the gaps. Training budgets were also raided. With the benefit of hindsight, this now appears to have been a short term response, which was ill-thought out, damaged relations with staff and may not have realised many savings as redundancy payments are substantial.

So why should the NHS react differently this time? One of the reasons is that it has longer to prepare. NHS spending is set until 2011 - giving breathing space - and is unlikely to rapidly decline after that, although the demands on the service may increase faster than the money available. Sian Thomas says the benefit of entering the downturn later is that the NHS can see how the private sector has navigated its way through some of these problems and learn from what has worked and not worked for them.

Mike Jackson suggests that how the NHS prepares for this downturn will be important. “Does it engage with the workforce to see how this could be done or does it go for slash and burn?” he says. “We have a much better chance this time round of having an engaged workforce.”

But the NHS may need to make more fundamental changes than it had to in 2006: the adjustments it needs to make won’t be just about getting into financial balance for one year but will stretch over several years and may even represent a permanent shift in funding and provision.

And it will be out of kilter with the rest of the British economy, which may well have recovered significantly just as NHS spending starts to falter. For those sectors of the workforce where the NHS is competing against the private sector - or the world economy - this may mean wages become uncompetitive and shortages result.