Improving the retention of NHS staff has been a long-term policy challenge, and will be of even greater importance in the aftermath of the COVID-19 pandemic. NHS pay is currently tightly regulated in order to reduce variation in pay for the same roles in different parts of the country and to stop hospitals competing for staff on the basis of pay.
However, this regulation has consequences: a new report by researchers at the Institute for Fiscal Studies and Imperial College London, as part of the National Institute for Health Research Policy Research Unit on Health and Social Care Workforce, shows that national pay-setting limits the flexibility of hospital trusts to respond to local conditions, exacerbating shortages in hospital nursing labour before the start of the pandemic. These shortages exist despite increases in the overall number of nurses working in the NHS.
Using novel administrative payroll data covering the entirety of the NHS acute hospital sector between 2012 and 2018, researchers find that in parts of England where house prices – a proxy of cost of living – have increased rapidly, the relative earnings of nurses in these areas have decreased compared to nurses living and working in areas with slower growth in living costs. This has translated into increased movement of staff between hospitals, and more exits from the hospital sector entirely among frontline nurses.
Variation in pay between nurses in different areas of the country is dwarfed by much larger differences in the cost of living. The median hourly earnings for a nurse living in London in 2018 were £18.41, or 11% higher than a nurse living in Burnley. However, the average house price in London is six and a half times more than in Burnley. As a result, the relative value of nurse earnings varies considerably across the country.
NHS Trusts have sought to respond to these cost of living differences. The avenue that most have chosen is to pay supplementary allowances and premia where allowed, and facilitating faster promotion if vacancies exist. However, these responses do not anywhere near compensate nurses for higher living costs, with a higher cost of living resulting in an increased exit rate from the NHS acute trust sector.
Trusts in London and many areas in the South of England, as well as areas like York and Harrogate, have responded more strongly to increases cost of living by accelerating promotions and making increased use of allowances and premia in responses. The average increase in house prices experienced by nurses in these areas (6.4%) was associated with an increase of 2.3% in their total earnings, despite their hours of work remaining the same.
Strong growth in the cost of living also led to an increased rate of job changes between trusts. Rises in house prices led to more than 1,700 nurses switching to a different trust in a year, or more than one in five such moves over the period. While this does not reduce the total number of nurses working within NHS hospitals, it does lead to hospitals increasingly having to find new staff to fill vacancies.
Isabel Stockton, an IFS Research Economist and an author of the report, said:
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“National pay-setting affords NHS hospitals little flexibility to respond to economic conditions in their local area. When, as a result, nurse earnings do not keep pace with local increases in cost of living, this prompts more nurses to exit NHS hospitals, particularly in expensive areas.
The existing system of supplements and retention premia is not fit for purpose. The pressures of the Covid-19 pandemic on staff, and the need to tackle a large backlog of NHS treatments in the aftermath, have only made the issue of nurse retention more pressing.”