New pay system planned in National Health Service

At the end of November 2002, the UK's government health departments, National Health Service employers and trade unions concluded negotiations on a new pay system for over 1 million health service staff. If ratified, the agreement will be piloted at 12 sites in spring 2003, with full implementation from October 2004.

On 28 November 2002, negotiators representing the UK’s Department of Health and devolved government health departments, National Health Service (NHS) employers, and 17 trade unions reached agreement on proposals for a radical reform of the pay system, conditions of employment and working practices covering more than 1 million NHS employees.

The agreement followed more than three years of negotiations on the Agenda for change programme initiated by the government (UK0201172F). The employers and trade unions broadly shared the government’s view that the NHS pay system is outdated. The 11 separate negotiating councils, covering 650 different grades and thousands of allowances, have discouraged changes in working practices, eroded the link between rewards and responsibilities, and led to pay relativities that cannot always be justified by the principle of equal pay for work of equal value. The process of negotiation was so lengthy, and its outcome is still uncertain, because the parties agreed to explore a comprehensive and radical package of reforms that had to be accepted in its entirety or not all.

The Department of Health has published three documents: an overview of the agreement; the full details of the proposed agreement; and a comprehensive job evaluation handbook. Health service trade unions are currently involved in extensive consultations with their members on the details of the proposed agreement. These should be completed by the end of May 2003. If they then ratify the agreement, more than 1 million NHS employees will receive a 3.2% increase in basic pay - the first part of a 10% increase over three years. Many staff will receive additional pay increases once the reforms have been implemented. For example, the Royal College of Nursing (RCN) estimates that the majority of nurses will receive pay rises of 15.8% over three years.

If ratified, the agreement will be implemented in two-stages:

  • from June 2003, 12 NHS organisations ('early implementers') will pilot the new system to identify initial problems, and evaluate the organisational capacity of the NHS to deliver such wide-ranging reforms; and
  • from October 2004, the changes will be implemented across the rest of the NHS (the 'national roll-out').

The main features of the proposed agreement

Pay structure

Apart from doctors, dentists and the most senior managers, all other NHS staff will be placed on one of two pay 'spines'- one for nurses and health professionals within the extended remit of the pay review body; and one for the rest of the directly employed NHS staff. Both pay spines will be divided into eight pay bands, and staff will be assigned to one of these on the basis of 'job weight' as measured by the new NHS job evaluation scheme. Many jobs have already been evaluated by trained panels of management-union representatives, and a number of job profiles agreed, so staff whose jobs fit one of the profiles will be placed on the new pay spine without the need for local job evaluation.

Career and pay progression

Within each pay band, there will be a number of pay points. Staff will progress annually from point to point to the top of their pay band, if their performance is satisfactory and they demonstrate the agreed knowledge and skills appropriate to that part of the pay band. Annual development reviews - including appraisal - will take place between staff and their managers to produce personal development plans linked to the needs of the job, as well as the career interests of the staff. If training or development needs are identified, managers should ensure that staff should be given time to fulfil them, and provide financial and other support. Part-time staff and those working outside normal hours should have equal access to the review and development process.

High-cost areas and recruitment and retention premia

A new category of 'high-cost area' supplements will replace the current system of London allowances. The supplements will be expressed as a proportion of basic pay, subject to a minimum and maximum level of extra pay; for example, staff in inner London will receive 20% of basic salary, subject to a minimum payment of GBP 3,000 and a maximum one of GBP 5,000. The value of the supplement will be reviewed annually and, in principle, the system could be extended to other high-cost areas in the future. Existing cost-of-living supplements paid to qualified nurses outside London will be converted into a revised system of recruitment and retention premium payments. These are additions to the pay of posts 'where market pressures would otherwise prevent the employer from being able to recruit and retain staff in sufficient numbers for the posts concerned at the normal salary for a job of that weight'. A distinction is made between short-term and long-term recruitment and retention premia, and the conditions under which they may be awarded nationally or locally. The total value of a recruitment and retention premium will not normally exceed 30% of basic salary

Working hours

An important part of the agreement focuses on the harmonisation of terms and conditions of service in the NHS, especially the wide differences in current patterns of working time.

  • All full-time staff will move eventually to a working week of 37.5 hours, or its equivalent over another reference period (eg four weeks or annualised hours). Staff currently working in excess of 37.5 hours will move to the standard hours within two years, while those working fewer standard hours will move to the 37.5 hours over a transitional period of seven years.
  • With the exception of senior staff in the highest pay band, all staff will be eligible for overtime payments at a single harmonised rate of time-and-one-half, except when working on public holidays, which will be paid at double time. Staff may request time off in lieu as an alternative to overtime payments.
  • In addition to the eight days of public holidays, annual leave entitlement for new staff will be 27 days, rising to 29 and 33 days after five and 10 years’ service respectively.
  • In place of the current multiplicity of payments for shiftworking and unsocial hours, new harmonised pay supplements will be introduced for all working hours patterns involving significant levels of work before 07.00 or after 19.00 on Monday to Friday, and any time worked on Saturdays, Sundays or public holidays. A banded system of pay enhancement, based on the average number of hours worked outside these times over a 13-week reference period, will be paid as a percentage of basic salary each month. This will range from 9% for between five and nine unsocial hours, to 25% for more than 21 such hours. Staff who have to be available to provide on-call or emergency cover outside their normal working hours will also receive fixed pay supplements of between 2% and 9.5% depending on the frequency of their on-call periods of work.

Implementation and procedural changes

The agreement outlines detailed arrangements for the timing of staff assimilation to the new pay system, and for transitional periods of protection of staff pay, hours, annual leave and other conditions of employment. It also provides a framework for monitoring and reviewing the implementation of the agreement at national and local levels, and for 'a new set of partnership structures to oversee and negotiate changes to the new system of modernised pay and conditions of service'.

  • The remit of the pay review body for nurses, midwives, health visitors and professions allied to medicine will be extended to all staff belonging to other state registered, healthcare professions. It also proposes that all of the parties review arrangements for working in partnership in providing joint evidence, analysing workforce issues, and implementing the review body’s recommendations.
  • A new NHS Staff Council will oversee the operation of the new pay system and have responsibility for NHS-wide terms and conditions of service.
  • A new Negotiating Council will negotiate and monitor pay awards for all staff on spine three (those not covered by the pay review body for nurses and healthcare professions), replacing the separate functional councils and negotiating bodies.

The agreement outlines new arrangements designed to ensure that the recommendations of review bodies and the decisions of the Pay Negotiating Council are consistent with equal pay requirements.


The proposed agreement arising from the Agenda for change negotiations is probably the most ambitious attempt to reform pay and conditions ever undertaken in the UK. Most of its features reflect the familiar pay 'modernisation' agenda of the government’s public service policies, but the reform of pay and conditions in local authorities (UK0209101N) and in schools (UK0302105F) has been more incremental and piecemeal. The NHS workforce is larger and more heterogeneous than that found elsewhere in the public services - reflected in a complex pattern of representation by professional associations and trade unions.

It is not certain that the agreement will be ratified by union members at the end of the current consultation period. Optimists note that the two most important health service trade unions - the RCN and Unison- have published fairly positive reports on the agreement, and they participated actively in all stages of the negotiations and influenced the outcome. Moreover, the reforms will be implemented during of period of rapid growth in health service expenditure. Pessimists point out that some groups of employees will gain much less than others from the agreement, and that when trade union members participate in ballots to ratify agreements, their votes may be influenced by a variety of instrumental and ideological factors.

Government ministers and NHS employers will be acutely aware of the precedent set by hospital doctors. In November 2002, after two years of negotiations between government and the British Medical Association (BMA), hospital consultants and specialist registrars voted two-to-one against a new contract that had been recommended by their negotiators. The new contract offered a 20% pay increase, but the consultants disliked the provisions governing the balance of work undertaken in the NHS and in private practice, and were anxious that their professional autonomy might be constrained by senior NHS managers. The government is also waiting for the result of an April ballot of family doctors (GPs) on another major package of pay and conditions reforms. In the light of their experience with hospital consultants, the BMA will not recommend the agreement to their members - a course of action that may be followed by some of the trade unions involved in the Agenda for change reforms. (David Winchester, IRRU)

Useful? Interesting? Tell us what you think. Hide comments

Eurofound welcomes feedback and updates on this regulation

Add new comment