Specialist medical accountant James Gransby explains how the affordability of recent pay increase recommendations will be dictated by staffing mix and partner numbers – and describes how practices can work out their budget for rises
The DDRB’s recommendation was that everyone working in general practice – partners, salaried GPs and practice staff – should receive a 6% pay uplift for 2024/25.
While the percentage increase to the global sum (7.4%) and amount per weighted patient to fund the pay awards will of course be identical for every GP surgery, there are key factors that will have a profound effect on which practices will fare better after passing on pay rises to staff.
Many practices deciding to award the full 6% to salaried GPs and practice staff will find that an equivalent uplift for partners will not make its way to bottom line profit.
Indeed, for some practices, a 6% pay award for salaried GPs and practice staff will erode all the extra funding and more, meaning profits to be shared by the practice partners will be diluted rather than bolstered.
What are the factors that make such a big difference?
Global sum v staff pay
A huge variable when comparing the affordability of the 6% pay increase between surgeries is the ratio of global sum to staff pay, or the staff versus partner mix.
Practices that benefit most will have lower staff costs as a proportion of their global sum and higher patient weightings. For example, partnerships with a large number of partners (and therefore fewer staff) will have a smaller staff pay bill and consequently a 6% rise on their total staff cost will be less than for a surgery where there are fewer partners and more staff.
Other contracts
Practices running additional contracts, such as locally commissioned services, extended hours and enhanced access will also have higher staff costs to deliver these. Therefore, an increase to the global sum figure alone does not accommodate any pay rise for staff working on these services.
So how can you calculate what is affordable?
First, it’s important to factor in the ‘on costs’ of employer’s pension contributions and employer’s National Insurance contributions (NICs) when calculating the cost to the practice of increasing staff pay.
If, for example, you have a budget of £60,000 to spend this will not equate to uplifting pay levels by £60,000 since you will need to factor in the additional pension and NIC costs.
On costs are 14.38% pension and 13.8% NIC. If the aim is for overall staff costs to increase by £60,000, the on costs mean you can only give a £46,800 increase in overall pay.
The uplifted global sum funding therefore needs to cover both pay increase and on costs.
Doing the sums
Your practice may simply decide to award the full 6% pay increase to salaried GPs and practice staff without doing any calculations first.
However, once the team has been told they are receiving an increase, it will be very hard for the partners to backtrack if profits are severely eroded as a result.
A practical approach would be to first assess how much of the additional funding could be given in pay rises – by calculating the amount of extra money coming in and then working out how much will be allocated for staff and how much is destined to increase partner profit, in line with DDRB recommendations.
The BMA has clarified that 50% of the headline global sum money received relates to staff costs, so take half of the extra money and earmark it for staff pay rises. You could wait to receive that money or if you want to do the calculations now, take the global sum uplift of £7.77 per patient, subtract the out of hours opt out of 4.75%, to arrive at the figure of £7.40 per patient. Halve this to give £3.70 and now multiply this by your weighted list.
Once you have this total figure for staff, determine how many people on the payroll are contractually entitled to the 6% rise, namely salaried GPs on the BMA model contract.
You also need to factor in pay rises already given in 2024/25 to cover the uplift in minimum wage in April 2024 of 9.8%. Some staff may also have already been given an increase higher than 6%. This will reduce the budget available for the rest of the staff.
Once these staff have been accounted for, review the amount left over and decide if this is the sum that should be allocated among remaining staff. If you decide to pay out more than this pot size, then the practice will have spent more than it was allocated for this, which means the funding aimed at also increasing partner profits will be eroded.
Looking at two worked examples gives a realistic picture for two different practices.
Practice 1
A partner-heavy practice with staff costs that are 60% of the global sum figure and a 8,000 weighted list size. Receiving £3.70 per patient will mean the budget for pay increases is a total of £29,600. This sum will allow the practice to award an overall increase of 6.18%, including on costs, so a 4.82% increase to gross pay before on costs.
Practice 2
A practice with fewer partners but more additional contracts, so staff costs are 90% of global sum. It also has an 8,000 weighted list size, so receiving £3.70 per patient will also generate a budget of £29,600 for pay rises. This sum will allow the practice to award an overall increase of 4.12% including on costs, which is a 3.21% increase to gross pay before on costs.
If both practices applied the full 6% uplift to gross pay plus on costs, Practice 1 would have £2.80 per patient of the £7.40 net funding received available to increase partner profits, whereas Practice 2 would have only £0.49 available. Neither of these numbers will deliver the 6% increase to partner profits recommended by the DDRB.
The DDRB made a recommendation for an uplift to GP profits for good reason. However, the global sum uplift of £7.77 per patient underfunds practices of nearly all shapes and sizes.
Next steps
Once you have done all your calculations, ask a specialist medical accountant to either prepare an options paper or check your numbers for you. Again, you don’t want to have to backtrack on the promise of a pay rise, should any miscalculations have been made.
To conclude, however, unless the £7.77 additional income is enhanced in some way the majority of practices will not receive the funding destined for an across the board pay rise for partners, salaried GPs and practice staff.
James Gransby is the Vice Chairman of the Association of Independent Specialist Medical Accountants and a partner at Azets
