The mediocre will be the only losers if pay is reformed fairly

Many HSJ readers will remember the period in the mid-1990s when the NHS last experimented with local pay. Our survey shows most are not keen to repeat the exercise.

There are memories of financially robust trusts paying more, attracting the best staff and accelerating disparities in care. People also recall that, in areas with a large number of providers, local pay accelerated costs – one of the consequences the chancellor has asked the pay review body to help avoid.

However, the commonest reason for opposing local pay is a practical one. Negotiating local pay can be massively time consuming, expensive, require skills that are often no longer present in denuded human resources teams and result in an explosion of challenges, grievances and equal pay claims.

Former Unison lead negotiator on NHS pay Mike Jackson illustrates how this issue is still a live one by highlighting the recent legal difficulties faced by trusts looking to agree an increment freeze for job guarantee swaps and/or altering terms and conditions for new staff .

But the lack of enthusiasm for a return to outright local pay bargaining should not be mistaken for a belief that Agenda for Change is still entirely fit for purpose. Many of its elements now feel out of step with the economic pressures on the service.

This week, HSJ exclusively reveals that foundation trusts are forecasting a 6 per cent decline in staffing levels by March 2014 – the steepest fall in NHS staff numbers since the mid-1980s. The projections for non-FTs are likely to be even worse. Pay reform is not the only solution to mitigating this decline. But it is hard to believe it will not play a significant role.

There is considerable – if often misguided – concern that public sector pensions are too generous. How might the public react if there was greater awareness of the £1bn yearly bill generated by the automatic pay rises NHS staff receive through Agenda for Change increments?

Of course, these rises should not be “automatic”, but for many – possibly the majority – of NHS staff they are.

Salford Royal Foundation Trust chief executive David Dalton spoke for many when he told HSJ: “We all have normal distribution in terms of contribution [to organisational goals and values] in all categories and grades of staff – some excellent role models and some poor performers carried by their team members – and yet we do nothing about it. We reward all levels of performance in the same way by giving the same annual increments… we reinforce mediocrity”.

He called for a “performance assessment system that allows each member of staff to be rated so that fair reward can be determined through the payment or deferment of an incremental pay point”.

Mr Dalton’s solution is not without its own problems, for example the determining of the correct “goals and values” in an integrated system. His plan would also require an improvement in HR resources and skills in many organisations. But at least it links the issue of pay reform to care quality. The pay review body should take the same approach and also take heed of the Salford chief’s “heart sink” at the potential consequences of “a centrally determined review of local pay”.

It is also important that pay reform is implemented fairly. There is considerable desire within the service to reform the clinical awards given to medical consultants – as expressed in the Department of Health’s June submission to the doctors’ and dentists’ review body. It would be inappropriate if the two reviews were to deliver recommendations which contrasted sharply.