'Stealth’ pay rises for NHS staff costing £1bn a year
The NHS is spending almost £1 billion a year on a stealth system of automatic pay rises, which have seen earnings rise by up to a third in five years
'Stealth’ pay rises for NHS staff costing £1bn a year
More than half of NHS staff received an incremental rise last year, giving an average total rise of 4.5 per cent last year Photo: GETTY IMAGES
By Laura Donnelly, and Alison Moore
10:00PM GMT 23 Nov 2013
The NHS is spending almost £1 billion a year on a “stealth” system of automatic pay rises, which have seen some workers’ earnings rise by up to a third in five years, an investigation discloses today.
Hundreds of thousands of staff receive automatic pay rises over and above nationally negotiated increases as long as they fulfil a basic level of performance.
The system means the cost of employing 1.3 million NHS workers is constantly increasing above inflation.
Under the deals a mid-ranking hospital manager who started on £73,000 five years ago now earns £98,000, a 33 per cent rise, while a consultant who was earning £67,000 in 2004 will now be on £90,000. In contrast, average wages have risen 10 per cent in five years.
The system, known as increments, have led to pay increases as high as 45 per cent over the last seven years for some staff without any promotion or improvement in performance.
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The Telegraph can disclose that:
• The system of automatic pay progression is now costing the NHS £900 million a year, on top of nationally negotiated deals;
• More than half of NHS staff received an incremental rise last year, giving an average total rise of 4.5 per cent last year, well above the rate of inflation.
• Hospital consultants were given rises of 34 per cent over nine years, since Labour introduced a new contract, while a majority of consultants received merit bonuses of up to £75,000 each that count towards their pensions.
Ministers said they would try to abolish “antiquated and deeply unfair” terms agreed under Labour which guarantee a “wage escalator” for most NHS staff despite severe budget pressures.
Although NHS spending is protected from austerity measures introduced to reduce the public spending deficit, a growing and increasingly elderly population means demand for health care outstrips growth in the budget.
Increments, or “pay progression”, exists in other parts of the public sector but George Osborne, the Chancellor, has indicated that civil servants will lose the perk by 2015-16, while efforts are also to be made to end its existence for teachers and police officers.
The investigation shows for the first time how badly the NHS is affected by the system.
Some groups of staff were paid increments before 2004, but the scheme and its costs increased when Labour introduced a pay structure which attempted to simplify 650 different staff grades and contracts into one system covering all non-medical workers, which they said would be fairer.
The system puts most workers into nine pay bands, with automatic progression through a band ever year until they reach the top of the scale.
The progression is contingent on meeting basic requirements of competence. It is not a reward for exceptional performance.
Our analysis of official figures shows that last year more than 55 per cent of NHS staff – almost 800,000 people – received a total pay rise of around 4.5 per cent last year.
The highest increase, received by a small number of consultants, was 7.7 per cent.
The nationally announced pay settlement was a one per cent rise last year.
The Treasury had indicated a likely one per cent rise for 2013-14 but last month the Health Secretary said that any increase should only be paid if unions agree to reform the system, phasing out increments and ensuring more staff work at weekends.
Even in the event of a zero rise, our analysis shows that most staff would receive a rise of 3.5 per cent. With a one per cent rise they would receive an average of 4.5 per cent, with more for many staff. More than 37,000 NHS managers receive pay progression.
Our analysis suggests that a deputy head of IT or finance, or a hospital divisional manager, appointed today on £78,000 can expect to see their pay rise by 26 per cent in the next five years, before any national deal is added.
A separate scheme in place for consultants sees automatic rises in seven out of 19 years, until they reach £101,000.
In addition, 60 per cent of consultants receive payments under a controversial “merit award” system which pays bonuses of up to £75,000.
Once such awards are made, they continue to be paid annually for life, and are counted as part of final salary, in contributions towards pensions.
As a result, average consultant NHS earnings are now £110,000, with additional private earnings, which cannot be counted towards NHS pensions, averaging £54,000.
Even at the lower end of the system, pay progression makes a significant difference to the wage bill.
A nurse starting out now on a salary of £21,000 would receive a minimum 20 per cent pay rise in seven years.
A more senior colleague, such as a matron, now paid £39,000, would receive the same percentage rise in five years as they worked through pay bands.
Last night Dr Dan Poulter, the health minister, said he system was not fair because it meant senior managers gained far more in cash terms than low-paid workers, and was not affordable.
He said: “NHS staff are working extremely hard every day to deliver high quality patient care and we want to reward their hard work.
“But any decision on a pay increase must be taken in the context of the nearly £1 billion annual pressure on the NHS pay bill caused by time-served incremental pay awards.”
Abolishing the system would allow the NHS to recruit at least 10,000 more front line staff, he suggested.
In spring independent pay review bodies will make their recommendations about next year’s pay round, with decisions ultimately taken by the Health Secretary.
Earlier this year unions and NHS employers agreed that the annual “increments” paid should be “more closely linked to performance” especially for managers in the highest bands.
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