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How To Manage Your Staff Efficiently

September 2010

The NHS Information Centre has recently published its survey on GPs’ earnings and it shows average income before tax for UK contractors at £105,300, a reduction of 0.5%.  Without contradicting the trend, the basis of the figures used needs to be considered carefully.  The survey is compiled from a sample of tax returns and the main difference between the figure of £105,300 and the £135,000 that is quoted in the press is the employer’s superannuation that is included in the GP accounting profits but deducted for tax purposes.  The rate of capital allowances for equipment has increased in recent years and the effect is to reduce GPs’ taxable income, reflected in the survey.

A review of GPs’ earnings from our own client base confirms a reduction in the year that is the subject of the review, 0.65% in our case, but, in real terms, the difference is meaningless. After tax and superannuation, the difference is £430 p.a. or £8.20 per week.  The real problem is in the current year, 2009/10, where it appears profits have dropped by 5.34% and future years with the likely loss of enhanced services and the squeezing of PMS practices.

Given this situation, what can the practice do to ensure it retains as much of its profits as possible?  There is the obvious and much repeated advice, increase list sizes, check your claiming, but, these days, it would be a negligent practice that did not do this as a matter of course.  The area that perhaps needs to be looked at most critically is the staff costs which generally account for 1/3rd of the practice’s core income.

If your profits are falling, the question arises of what kind of impact does this have on your staff?   The issues to consider are:

1. Redundancy

2. Pay Rises

3. Sickness and Overtime

A typical practice should not be spending more than 33% of its core NHS income (Baseline or Global Sum Equivalent + QoF + Enhanced Services) on its staff. Staff for this exercise include receptionists, secretarial, management, nurses, administration, but not additional doctors (salaried GPs or locums).  If the costs are more than 33%, the practice must look at why that is the case.  The easy answer to this is to just acknowledge that these costs are necessary, but experience shows that, when the staffing roles and levels are examined and the costs are more than the 33% without any good reason, the costs can be reduced.  This will require an in-depth look at the roles and duties and it may well result in necessary redundancies.  This, in turn, means making difficult and painful decisions but, if the interest of the practice is considered paramount, those redundancies will have to be made.

Of course, it may well be the case that the staff ratio has increased beyond 33% because the practice income has been cut (a reduction in the denominator will increase the percentage).  In such a situation, the practice needs to consider whether it is viable to continue with the level of service it provides with its current level of staffing costs.  In other words, if the income is falling, who bears the consequences, the partners with a reduced profit share or the patients as a consequence of reduced funding?  It may be a philosophical argument, but it should not be assumed that the GPs will absorb the loss.

While GPs’ profits are falling, what pay rise should be given to staff?  There are two schools of thought here.  The view that pay rises should follow the review body or agenda for change, or some pay scale separate from the practice, or the view that the staff are part of the practice and cannot be immune from the consequences of what is happening to the practice.  The reality is that the practice profits are being reduced and in the bluntest terms, this means the GPs, the owners of the business, are earning less.  It is hard to find a justification for giving the staff a pay rise while the partners are effectively having a pay cut.  In such circumstances, a pay freeze for staff seems fair.  They are not being asked to share in the loss, but are not being given a pay rise out of falling profits.

In many practices, overtime is paid by right, sometimes at time and a half or more.  In other practices, the staff contracts specify the duties and they are obliged to complete their duties however long it takes without any additional pay. In the middle ground, there are practices who pay overtime for exceptional circumstances, but it has to be approved by a partner and there has to be good grounds for making such a payment.  GPs are having to work harder than ever before and are having to do so for no additional financial return.  In fact, in many cases, they are working harder for a reduced return. If your practice pays overtime, you might reconsider reviewing the basis for this payment.

Some practices pay sickness pay and some just pay Statutory Sick Pay.  Some practices pay a maximum level of sickness, e.g. four weeks’ sickness per year.  It is not uncommon to find employees in such practices regularly taking days off work sick.  This does, of course, have a consequence for the staff costs and affects the practice use of overtime.  An over-generous sickness policy may be seen as kind and caring, but is also open to abuse.

This article was written by Laurence Slavin