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real cost of salaried gp vs partner

november 2009

the decision over whether to replace a retiring partner with a salaried gp has been hotly debated over recent years.  before the new contract, it was difficult to find gps who wanted to be partners.   in many cases, salaried gps were earning more than partners.  it is worth remembering that iani (intended average net remuneration) was set by the department of health as recently as 2002/03 at £61,618 for gp principals.  the new contract has significantly increased the earnings of gp principals, whilst those of salaried gps has remained fairly constant.  a consequence of this is that, at the time of a gp principal’s retirement, a partnership may well think they will save a considerable amount of money by replacing the retiring partner with a salaried gp.  can these costs and savings be quantified?  the good news is now they can, but the results may not be what you expect!

 

in september 2009, the nhs information centre published “gp earnings and expenses 2007/08 provisional report.”, a report produced by the technical steering committee (tsc).  the report goes on for 99 pages and contains a lot of useful information.

 

the executive summary in the report mentions some interesting points.  on average, they say, contractor gps (i.e. principals) work more hours than salaried gps.  one of the difficulties in comparing the earnings of a principal with a salaried gp is that the declared earnings of a principal include 14% employer superannuation contributions, however, the tsc have been able to exclude these contributions and in the report, declare the principal’s earnings net of employer contributions.

 

according to the national averages published in the report, the average income before tax for a gp principal, after deduction of employer superannuation contributions for 2007/08, was £106,072.  the average earnings for a salaried gp on the same basis for 2007/08 were £55,790.  included in the principal gp figures are “fixed share” partners who receive a profit share at a pre-determined level.  there are no figures for these gps given in the report and they would be included in the principal gp findings.

 

so what factors need to be taken into account in comparing the costs of a salaried gp to the profits that would be attributed to a partner? 

  1. the amount of time a salaried gp works compared to a principal.  the report quantifies this.  the average principal works 7.6 sessions compared to the average 5.3 sessions for the salaried gp.  
  1. employer’s national insurance will need to be added to the cost of the salaried gp, currently at 12.8% (increasing to 13.3% in april 2011). 
  1. the employer’s superannuation that the practice will need to pay on the salaried gps earnings.

 

taking these costs into account, you can see from the table that the actual cost increases to £101,440 for a salaried gp working 7.6 sessions.

 

that having been said, the report also specifically mentions that principal gps have additional responsibilities over the salaried gp covering clinical, organisational, operational, financial and personal responsibility for the provision of gp services.  the report gives no attempt to value theses responsibilities, but it is not unreasonable to suggest that one session per week would cover these issues.  this means that we need to discount the earnings for the gp principal to compare earnings excluding these factors.

 

from the table, we can see that the difference falls to earnings of £93,738 for a gp principal and costing of £101,440 for a salaried gp, making the gp principal better value by £7,702.

 

there are other factors to be borne in mind.  if you take on a partner, it is difficult to get them to leave if the partnership suffers a severe reduction in resources.  you can always make employees redundant if you need to.  partners are involved in decision making, not always a welcome intervention!

 

the model bma salaried gp contract requires the gp principal to provide 30 days leave, 10 days public holiday, as well as professional and study leave.  this is probably more generous than many partnership agreements.

 

from the analysis of the above, it is surprising to see that a gp principal will earn less and accordingly, cost less than a equivalent salaried partner working the same sessions. the expectation is that gps’ profits will fall in the next few years, which may not have an effect on the level of salaried gps pay.

 

laurence slavin