Agreement on implementation of pay reforms in National Health Service

In November 2004, representatives of the UK government, National Health Service employers and trade unions reached an agreement to reform the pay and conditions of employment of more than 1 million health service staff.

At the end of November 2004, after five years of discussion and negotiations between the government, health departments, National Health Service (NHS) employers and trade unions, final agreement was reached on the implementation of the NHS’s modernisation programme, Agenda for change.

The initial plans for the modernisation of the outdated and fragmented NHS pay system were outlined by the government in 1999, and agreement was reached with the employers and trade unions on draft proposals in November 2002 (UK0303104F). By the end of May 2003, almost all of the 17 nationally recognised trade unions received strong membership support in ballots on the proposal that the draft agreement should be piloted in 12 NHS Trusts - the 'early implementers' (UK0306103N). The pilot studies began in June 2003, and the benefits and problems associated with the new pay system were evaluated in a report published by the Review Body for Nursing and other Health Professions in May 2004, and in a second report produced by employer and trade union members of the 'shadow executive' of the NHS Staff Council in August 2004. The latter report was followed by a period of intense negotiations on the most contentious issues and problems, leading to changes in the substance of some of the proposals and in the process of implementation. These were incorporated in the final agreement, and its implementation (the 'national roll-out') began in December 2004.

Key lessons from the 'early implementers'

The Review Body reported that the reforms helped service delivery by facilitating the creation of new and extended roles for staff alongside fair remuneration for such posts. Staff reported that they felt more valued by being treated equally, and they welcomed the removal of artificial demarcations between groups working closely together. The new 'Knowledge and skills framework', designed to provide better access to training and development and, in turn, improved career paths for all staff, was also welcomed by everyone, although the report found that in some organisations its implementation had been delayed in the face of more urgent issues. All of the parties agreed that the process of implementing the changes had improved the working relationships between managers, union representatives and groups of staff. Alongside these benefits, senior managers were anxious that there might be insufficient funding for the implementation process, and to meet the cost of assimilating staff onto the new pay bands. All of the early implementers reported that the workload involved in introducing the new pay system was far higher than expected. The report of the shadow executive of the NHS Staff Council was even more positive, arguing that 'most parts of the new system had worked well' and that sites had 'benefited from improved partnership working'. Both reports noted, however, that serious problems had arisen in two areas: the implementation of pay structure reforms; and the harmonisation and reform of payments for working unsocial hours.

Pay structure reform

Apart from doctors, dentists and the most senior managers, all other NHS staff will be placed on one of two pay 'spines', each divided into eight pay bands. Staff will be assigned to a pay band on the basis of 'job weight' determined by local job evaluation, or by 'matching' with nationally agreed job profiles. The Review Body found that delays in releasing job profiles led to many more local evaluations than expected in the early implementer sites. This imposed additional costs and delays, as there was a reluctance to evaluate posts in case a national profile was later produced that differed from the local evaluation. There was also a widespread belief that the job evaluation scheme placed too much emphasis on direct patient contact, so that some professional staff (eg pharmacists and technical staff) were placed in lower pay bands than expected. The later report of the shadow executive of the NHS Staff Council accepted the validity of these criticisms. In response, it issued revised guidance, produced more non-clinical job profiles, and promised that it would closely monitor the application of the job evaluation scheme to ensure that jobs are evaluated appropriately.

Unsocial hours payments

The most significant problems arising from the experience of the early implementers concerned the proposed reform of payments for working unsocial hours. This envisaged the replacement of the existing system under which different payments are attached to each kind of unsocial shift worked by different groups of staff. In its place, the reforms envisaged that patterns of unsocial hours should be agreed in advance, and rewarded by fixed rates on broad payment bands within which staff could then work more flexibly. In practice, in areas where working patterns were variable and there were pressures on overall staffing, employees were often unwilling to work extra shifts and managers were often unable to cover shifts at short notice. The proposed system embodied a perverse incentive for staff to work the minimum number of hours required to be allocated to one of the pay bands.

In the negotiations in August 2004, one of the two most influential health service trade unions, Unison, argued strongly that the proposed system failed to provide an adequate reward for weekend and bank holiday working, and discriminated against the lowest paid staff. It would also have imposed higher than expected costs on employers under the 'protection of earnings' provisions of the agreement. For these reasons, the planned harmonisation of unsocial hours payments has been de-coupled from the Agenda for change final agreement, except in the case of Ambulance Trusts where it has clear benefits for both employers and employees. Elsewhere, the current provisions will continue to apply until April 2006, by which time the parties may have reached agreement on a revised proposal that is less costly, more manageable, and meets the principle of equal pay for work of equal value.


The final agreement on the Agenda for change reforms was celebrated by all of the parties involved. Liz Hewett, an executive director of the Royal College of Nursing, argued that it will improve the working lives of nurses by providing more opportunities for staff to enhance their skills and work more flexibly, and by breaking down the boundaries between healthcare professionals to provide better patient care. Significant increases in the pay of nurses - for example, the starting salary of a newly-qualified nurse will increase by more than GBP 1,000 and match that of a newly-qualified teacher - will make a positive impact on recruitment and retention. The general secretary of Unison, Dave Prentis, welcomed 'the birth of a new NHS which will deliver fairer pay and greater opportunity for more than one million staff', and stressed the importance of the increased minimum wage that will increase the salary of the lowest paid NHS workers to more than GBP 11,000. He noted that the agreement comprised a complex package of provisions, and that Unison would ensure that its representatives would be given sufficient training to ensure a smooth implementation process that maximised the benefits for its members.

Government ministers and NHS employers also warmly welcomed the agreement, although both may have been concerned that the cost of its implementation over the next few years may exceed the substantial increase in funding that has been committed to the reforms. Apart from higher than expected paybill costs of some of the reforms, the 12 pilot studies revealed that the implementation process severely tested the organisational capacity and resources of managers and union representatives. All of the parties reported that the commitment to a 'partnership approach to pay and service modernisation' had been very helpful, and the final agreement begins with a strong statement on the further development of partnership working at local level. Over the last few years, the Agenda for change proposals undoubtedly generated more cooperative forms of partnership within the NHS, but as evidence from other sectors has shown, it is not easy to sustain genuine partnership relationships when unanticipated financial or organizational problems emerge. The next few years will test whether the implementation of the agreement can generate sufficient improvement in the quality of healthcare, as well as in the working lives of NHS staff, to satisfy the expectations of government ministers and NHS employers and staff. (David Winchester, IRRU)

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

Eurofound welcomes feedback and updates on this regulation

Add new comment