“To provide maximum scope to encourage local bargaining on self-financing pay increases” Chancellor of the Exchequer
“Why is the NHS adopting pay strategies rejected by the private sector?” Health Service Journal
In the context of the stunning nature of wholesale structural changes announced in the coalition’s white paper on NHS reform, it was easy to miss a single sentence on the pay and reward implications. It says that “in future all individual employers will have the right to determine pay for their own staff”, seemingly signalling the end of the national Agenda for Change framework of bargaining and terms and conditions.
Some will react positively to the new freedoms - some trust HR directors feel constrained at having so little control over the pay “levers” to support organisational change. Local pay rates, productivity schemes and flexible benefits schemes could all be on their agendas.
But for others, the sentence induces a wry and knowing smile. The two quotations above were not made in reaction to this white paper. Both come from late 1993 and the reorganisation then announced to establish independent health trusts. My own Health Service Journal article was unfortunately prescient in predicting the dangers, and there was widespread support for the Agenda for Change reforms and the introduction for the first time of a national structure of bands covering all non-medical NHS staff after the very mixed experiences of the 1990s. I have heard very, very few voices calling for the removal of this structure within the service since it was introduced five years ago.
Research in the private sector and among local authorities confirms that local pay undoubtedly gives the freedom to better react to specific employer needs and market conditions. But it also leads to a huge duplication of effort and often raises questions about the capability of those managing these freedoms at the local level. It can defeat organisation-wide objectives. And most worryingly of all for the government, as can be seen from the experience of the few local authorities who have opted out of national bargaining, it is a more expensive strategy to operate.
The Institute for Employment Studies jointly hosted a debate with the London School of Economics earlier this year on HR trends in large private-sector organisations. The debating theme “What’s winning out, corporate consistency or local culture?” was definitely resolved in favour of the former, with participants such as Shell being driven by technology and cost savings towards greater corporate-wide standardisation and consistency of HR and reward processes.
Even heavily devolved companies such as Arup and Canon are moving to more consistency at the regional level, trying to achieve a balance of the benefits of both local freedom and transnational co-ordination. But the regional structure is being completely removed in the NHS of course, with a huge loss of HR and OD expertise in the process.
Political dogma must not be allowed to obscure the very real dangers of repeating the 1990s experiences with local pay in the NHS, from which staff, and we as patients and taxpayers, are likely to suffer.