Flexibility of Fragmentation: Trends and Prospects in Nurses Pay(13 Briefing Paper S.)

This report was prompted by the debate on how best to determine nurses pay in the NHS. Increased emphasis on cost control, devolution of managerial responsibility and the establishment of self-governing "trusts" are key elements of the NHS reforms, and will have a major impact on the way nurses pay is determined. This report examines the impact of these reforms in terms of the likely labour market effects of local pay "flexibility", and in terms of the continued existence of the Review Body. NHS managers interviewed in the course of the study recognized many advantages and drawbacks of the current, centralized pay system. Some were formulating detailed plans for change, which in some cases envisaged a radical move towards "stand alone" pay determination, with a heavy emphasis on individualized payment. However, most managers regarded changes in the skill mix of the nursing workforce as a first priority, and a major source of cost savings. Constraints on the pace of change which were noted by managers were primarily resource linked - in relation to funding availability and the existence of sufficient expertise in the personnel function. Indeed, in some NHS units there is an apparent gap between the central impetus for local change, and the local level capabilities to deliver and manage that change. The limited geographical mobility of many nurses, and the requirement made of many nurses to achieve a balance between career and domestic commitments ensure tha the relationship between nurses' pay and labour market behaviour is complex. If pay determination is devolved, many NHS units will have what aounts to a "captive" local labour market of nurses; where NHS units are competing, managers will come under pressure to limit nurses pay increases by collaborating formally or informally with other units. Whilst the number of NHS units wishing to exercise pay "freedom" remains small, the Review body can retain its validity, but by 1993-4 a third wave of trusts will be underway. The role of the Review Body will then be seriously compromised, and some fragmentation of the system would be inevitable. Nurses pay determination has never been simply about pitching pay levels to recruit, retain and motivate. There has always been a tension between political factors (pay more, to assuage public opinion; pay less, to accommodate treasury and taxpayer), managerial demands (pay enough to recruit and retain, but not more than enough) and trade union and professional demands (pay more, to improve status and secure long term supply of staff). The Review Body has, in recent years, had to attempt to maintain a balance between those competing pressures. Devolving responsibility for pay determination will not release these pressures, but rather will transfer the burden of maintenance from Review Body to local management. A significant level of pay devolution would undermine the role of the Review Body, and could lead to a net comparative reduction in the NHS nursing paybill. It would not, in itself, "solve" recruitment and retention problems, and would place considerable demands on local management.

Table of Contents:
Part 1 Introduction: the political and economic background. Part 2 Trends in nurses pay determination: historical background, 1948-92; pay trends; overview. Part 3 Plans for nurses pay: current recruitment difficulties; the current system of nurses pay determination; the future pay system; overview. Part 4 The labour market context: labour market characteristics of nurses; nurses pay and labour market characteristics; overview. Part 5 "Flexibility or fragmentation?": scenarios of change; controlling costs; labour market implications; the Review Body; flexibility of fragmentation?