SW Acute CEOs Meeting

Background Presentation

King’s Fund: How is the NHS performing?

April 2011

TOP WAYS TO MEET PRODUCTIVITY TARGETS

Which means... % selected by FDs

FRONTLINE EFFICIENCY Length of stayInternal service redesignReview of prescribing

77%

WORKFORCE Stop agency dependencyHeadcount reduction through rationalisation

62%

WHOLE SYSTEM EFFICIENCY Community service redesignService reconfiguration across providersClinical service improvement

50%

CLOSE WARDS OR SERVICES Bed closuresService divestment

46%

BACK OFFICE EFFICIENCY Significant back office reductions 23%

REDUCE ACTIVITY Demand management 19%

EXTERNAL CONTRACTS Non-pay procurement savings 12%

Agenda for Change aspirations (March 2003)

Pay system which leads to more patients being treated, more quickly and higher quality

Assist new ways of working – promoting efficiency and effectiveness, meeting needs of patients

Achieving a quality workforce with the right numbers, right skills and diversity, organised in the right way

Improve recruitment, retention and morale Improve all aspects of equal opportunities and diversity Meet equal pay for equal value Implement new pay system within the management, financial and service

constraints

3

Example NHS Foundation Trust Acute district general hospital Turnover: £150m Workforce: 2500 staff (£100m salary bill) Vacancy rate = 5%; turnover = 8% (excluding doctors) Sickness absence rate = 3% Temporary staffing spend = £10m Savings target (cost reduction): £15m 2011-13 Savings profile: workforce £9m (60%); non-pay/infrastructure £6m Average unit employment costs: £40,000 5% management costs 200 consultants

Ready reckoner: impact of 2% pay cut on pay packets

20k 30k 40k 50k 60k 70k 80k 90k 100k0

200400600800

100012001400160018002000

Column2

Ready reckoner: the actual impact

Net payNI-employeeNI-EmployerPension-employeePension-employer

Ready reckoner: jobs and savingsSavings required Jobs equivalent % pay cut equivalent

£400,000 10 0.4%

£800,000 20 0.8%

£1,200,000 30 1.2%

£1,600,000 40 1.6%

£2,000,000 50 2%

£4,000,000 100 4%

£6,000,000 150 6%

£8,000,000 200 8%

£10,000,000 250 10%

Pay compressor options

• Pay inflation (uplift)• Increments• Temporary staffing rates• Two-tier workforce• Annual leave• Sickness absence• Unsocial hours allowances• Flex-release• Premium sick pay• Recruitment and retention premia (RRP)• On-call• Supporting PAs• Remuneration for extra clinical work

Labour cost compressorsCompressor Unit price NotesCost of living pay Already zero for 2011-12 No opportunity to reduce in 2011-13

Increments Average 2% (£800) per job costs Average masks range per band position

Pay levels 2% pay cut = £2m See ready reckoner

Bonus scheme CEA (local): £120-210k annual cost Based on 200 consultants – range between .2 to .35 awards per consultant at average £3k per award

Annual leave £150 per day: one day removed across 2500 staff = £375k plus cover costs

Assumes workforce can reduce if entitlement reduced to make savings. Each post which needs cover incurring extra cost, doubles the saving

Sickness leave £150 per day Calculated from average temp costs and/or attendance increase allowing for workforce reduction

New Knowledge, Skills and Performance Framework

£300,000 saving on increments 10% of staff assumed not to be performing

RRP £100k annual cost Immediate saving on new posts – protection period will determine rate of saving on existing staff

Sickness premium pay £100k annual cost

Flex-release Voluntary Voluntary release of contracted working time on temporary or permanent basis with/without subsidy

Sample contrasting savings programmes (over 2 years)

Delivers £9m

Pay cut 1% = £2m

Conditions reductions = £2m

Flex-release = £1m

Temp remuneration reduced = £1m

Skill mix changes = £1m

Selective vacant post reductions = £2m

Delivers £9m

Redundancy = £2m

Jobs freeze (5% vacancy rate) = £5m

Outsourcing savings = £1m

Skill mix changes = £1m

Sample contrasting savings programmes (2011-2013) Assumptions

Delivers £9m

2 years pay cut at 1% across workforce

2 day annual leave – 2 days of sickness absence/premium rate unpaid –

suspended bonus scheme - no RRP -

50 staff release 50% of contracted hours without subsidy

10% temp pay rate cut

10% shift of responsibilities downwards from bands 7 to 6 to 5 to 4

to 3 equivalent to 50 posts

25 posts removed selected after reasonable changes have been made

Delivers £9m

50 staff

Jobs freeze (5% vacancy rate) = 125 posts

10% savings from £10m of staffing

10% shift of responsibilities downwards from bands 7 to 6 to 5 to 4

to 3 equivalent to 50 posts

Possible handling principles • Comprehensive, resourced, undiluted engagement and involvement of

staff and their representatives• Widest possible, and reasonable, definition of suitable alternative

employment• Investment in training and professional development• Reversal of pay and conditions compression if circumstances allow• Introduction of a new Knowledge, Skills and Performance Framework to

promote advancement and withhold increments from under-performance• Bonus scheme for all staff (% unconsolidated pay rise) when trust delivers

financial and service objectives, and generates available surplus