NHS agency spend: the hidden truth

In 1997 the NHS spent over £700 million on agency nurses. This year the figure will have risen to over £2.5 billion. Why pay outrageous amounts of money to agencies when it is clearly cheaper to employ permanent staff? I will show that in actual fact it is not cheaper to employ permanent staff, and that increasing agency use is just more laying of ground work in preparation for the privatisation of the NHS.

Submitted by working class … on July 31, 2014

The figures on agency use rise year on year, across all areas of the NHS, and regardless of whatever party is in power. The public, the media, and the unions are all outraged at the cost and alleged drain on NHS resources.

First of all, it always infuriates me when the media use the term ‘waste’. It is not money that is simply thrown away - it is being spent on ‘patient care’. The work and care that agency nurses’ deliver is valuable work, and should not be dismissed as a ‘waste’.

Secondly, there is the media outrage at individual cases of nurses allegedly being payed £1,800 a shift. Those examples are as rare as rocking horse shit, and are simply false. Agencies tender for contracts with individual NHS organisations and provide set fees - they don’t pick and choose what they charge (anymore). Now the market is saturated with agencies, some of the power has shifted back to the NHS, which why the hourly rate that agencies charge has been driven down. I worked for an agency in 2002. The hourly rate I was paid then was £5 an hour more than I would be paid if I was employed by the same agency today…

Furthermore, it is interesting that the free-market, tory-faced politicians are all for opening up healthcare to ‘the market’ when a pin-stripe suited, private mental health provider, is demanding up to £10,000 a week for one patient, but when supposed excessive amounts of money may be going to a nurse, it is somehow unacceptable…. Sounds like the free market for some, but not for others.

On the face of it, it makes no sense to use expensive agency workers… For every £1 an hour they are paid, their agency receives another £1. So in an age of austerity, why are the bosses choosing the most expensive and least effective option?

I don’t believe that it is more expensive, I believe it is just another element of a grand plan to drive down terms, conditions, pay, and pensions etc… which will ultimately leave parts of the NHS ripe for cherry picking by private sector vultures…. The following is a list of reasons why I believe it is not cheaper to employ permanent staff in the NHS. The list is not exhaustive and clearly some of the points on the list will lead to much greater savings than others. Also, some of the points are initial one off savings, whereas some only lead to savings when a nurse’s entire career is taken into account (assuming it is 40 years)… Some of the figures may sound like crude calculations, but I believe they stand up to scrutiny

1) No advertisement costs, cost of interviews, CRB/DBS, or any costs relating to recruitment. The agency will cover all of these.
2) No occupational health costs. If you consider that NHS trusts have whole departments to cover the health of the workers, then every worker who is an agency employee means less spent on occupational health.
3) Mandatory training – In the NHS all new employees would have a week of initial mandatory training (more in some areas) with updates each year. Agency workers undertake this via their agency - often unpaid. This saves the NHS money and means it can reduce the size of training departments.
4) Insurance costs – portions of this switch across to the employers, i.e., the nursing agency, and not the NHS.
5) Each NHS trust has a training budget (above and beyond mandatory training)… usually spent on post-grad training for nurses. Agency workers are not entitled to this - therefore the budget can be reduced.
6) Indemnity insurance the cost and responsibility is transferred over to the agency.
7) Human Resources departments are huge within the NHS. The greater the number of staff working in the NHS that are employed by private agencies, then less needs to be spent on HR.
8) The NHS does not have to make flexible working arrangements for agency workers.
9) Agency workers are not subject to NHS maternity and paternity rights…. ( Several months full pay – Mothers may take several times during careers)
10) The costs of uniforms throughout a nurses’ career will be transferred from the NHS to the agency.
11) The NHS does not have to pay ‘sick pay’ to an agency worker (neither does the agency). When an NHS worker is off sick, then they are paying twice, as they pay for a replacement too..
12) The NHS suspends staff on full pay, often for months at a time. Agency workers are just not rebooked.
13) NHS workers are subject to long and costly disciplinary procedures, agency workers are dealt with via the agency.
14) The NHS pays unsocial hours payments for nights, weekends, and bank holidays. For an average ward based nurse – assuming reasonable share of unsocial hours – this would equate to around £2,000 a year, rising as they move up their pay band. Would likely reach £100,000 over the course of a nurses’ working life (Assuming they work for 40 years)
15) The NHS does not have to provide 6 weeks paid holidays and 8 bank holidays to agency workers. This would equate to over £100,000 over the course of a nurses’ working life (assuming they work for 40 years)… NHS has to pay twice, as they need to cover shifts… Does not apply to agency workers.
16) The NHS does not need to pay redundancy pay to agency workers
17) The NHS does not need to relocate nurses who are surplus to requirements. The can just cancel the bookings.
18) The NHS does not have to continue to pay workers if a service is closed, and(or) until another post can be found for them.
19) The NHS does not need to pay national insurance contributions for agency workers.
20) The NHS does not need to provide on-going clinical/managerial supervision to agency workers, or the administration required when managing permanent staff members.
21) Agency workers are paid a fixed rate that only rises through inflation. Nurses employed in the NHS have annual increment rises as well as inflationary pay rises. Over the course of a nurses’ career, if he/she had one promotion, they would move from one pay band to another (5-6) – across a spectrum of £14,000. This would take (on average) 10 years to achieve. This would mean that over the last 30 years of a nurses’ career they would earn £420,000 more than if they had stayed at the very bottom of the lowest registered nurse pay band…. An agency worker never leaves the bottom of that pay band – Which theoretically saves the NHS £420,000 over a nurses working life.
22) The NHS does not pay pension contributions for agency workers.
23) The NHS does not pay pensions for agency workers. Assuming nurse lives 20 years post retirement, the saving to the NHS/government on not paying a pension and initial lump sum, will be £100,000+
24) The NHS pays a ‘death in service payment’. Agency workers are not subject to this.
25) Agency workers are generally not unionised - and even if they are - they are not part of any collective agreement within NHS trusts. Therefore, huge swathes of workers in the NHS are immediately disenfranchised re any negotiations re pay and conditions etc…
26) The more the percentage of staff working within an organisation are employed by agencies, then the more attractive it becomes to the private sector. The costs are less, and there is less hassle with TUPE etc…
27) Lastly, if it was cheaper to employ permanent staff, then temporary agencies wouldn't exist in any sector.

Assuming a registered nurse works in the NHS for 40 years (I will work 46 years based on projected retirement age) never reaches a management grade, and never has a day off sick, then based on my figures above, the cost of that nurse – over and above their basic salary would be £800,000…. (mainly on pensions, holidays, enhanced payments)… when you factor in the hidden/indirect costs, and maybe add in ‘average’ sickness payments, then the cost of a nurse over and above their basic salary it likely to approach £1 million.

As agency employed nurses’ are only ever paid a flat salary (i.e., only receive inflationary pay rises – no increments), then during a 40 year career and a 20 year retirement, an agency nurse would cost the NHS £1,000,000 less than a nurse actually employed by the NHS….. However, for every £1 paid to an agency nurse, the agency receives another £1 – so this brings the total saving down to £500,000…

So, like-for-like, and once the agency has taken their cut – a nurse employed by the NHS will cost employers/tax-payer approximately £500,000 more following a 40 year career and 20 year retirement, than an agency employed nurse, would.

Based on these figures it is clear why for over twenty years, governments of all stripes have been happy for agency bills to soar. Whilst in the short-term it may – on the surface - appear expensive, there in a long-game being played.

The bosses will have you believe that agency use is ‘extra’ to a set ward staff establishment, and only used when there is increased acuity or staff sickness. This is false. Ward staffing establishments are deliberately set lower than they should be. This is to allow an almost permanent 20-40% of a wards staffing to be ‘agency’, which in turn leads to the savings listed above. Over the coming years you will see that 20-40% rise, just as it has over the last 20 years….

What will the unions do about it? Not much, they will probably be busy gorging on their monthly partnership meeting buffet, with the bosses, and they haven’t cottoned on to the truth yet, and still parrot the line that it is cheaper to employ permanent staff…



9 years 10 months ago

In reply to by libcom.org

Submitted by Baldrick on August 6, 2014

I am impressed with the figures and research for this article. Do you have any observations about the role of NHS chaplains employed by NHS Scotland as a further aspect of the overall theme you follow that agency work is cheaper for health boards? My approach is to seek the rationale for using full-time, well-salaried chaplains in hospitals in Scotland as a secular critique, bearing in mind your illuminating comments about the long-term 'strategy' of the apparatus to subvert the public function of the NHS in favour of private provision.

working class …

9 years 10 months ago

In reply to by libcom.org

Submitted by working class … on August 6, 2014


I think NHS Chaplains are on borrowed time...... All trusts work to different timescales & have different barriers to change, but the trust I work for no longer has its own trust employed, estates, domestic services, occupational health departments... With medium term plans for catering and laundry to be tendered out... In the departments that have been privatised, the staff remain the same, but their pay, terms & conditions etc, have been reduced.. Yes, the NHS has to pay a private provider for services provided within their own hospitals, but they ultimately save money because in the 'long term' most of the cost is tied up in the staff, so if their pay and conditions are less - they save money (as described in the blog post).....
Chaplains, like estates, catering, domestic services, laundry etc.. are not core clinical services, so are ripe for culling. There is also less of a barrier in terms of public outrage if and when those services are sold off... I can imagine trusts (at some point) saying that chaplains and all religious involvement within hospitals (whilst desirable for some) should not be a cost burden to the NHS, & that input within hospitals from faiths of all denominations should come from the local community as an in-reach service, rather than as a permanent presence (& NHS funded) based within hospitals (as it probably was decades ago)... I haven't heard of this happening anywhere yet, and in the big scheme of things 'chaplaincy' would not be a priority to review (in monetary terms)... But I have no doubt it will happen at some point...


9 years 10 months ago

In reply to by libcom.org

Submitted by Baldrick on August 9, 2014

Thanks for this. I take your point about the money saving device of agency use and about privatisation. However, the situation in Scotland, as you probably know, is somewhat different. Chaplaincy since the start of the new century has entrenched itself as a core clinical service established by Scottish Government fiat within the fifteen geographic NHS boards (not Trusts) that are centrally and tightly controlled. Chaplaincy is an allied health service with its own competences and capabilities and, because of the much smaller size of the NHS Scotland compared to south of the border, is effectively and paradoxically a secular developing facility within a secular greater NHS.

I say "secular developing" because NHS chaplaincy here in Scotland is an emergent device being prised free from its history in a former gentleman's agreement that funding for religious chaplaincy would be half and half Church of Scotland as the "established" church and NHS money. From about the year 2000 hospital managers were directed by Executive Letters from the Scottish Government to absorb the facility completely as a salaried AHP profession, to 'nationalise' chaplains as a clinical function. The reaction of the Catholic hierarchy is instructive here in that they are hostile to this process of desacralising of their priest chaplains. As you know a priest has a sacramental function and his 'manager' is not the hospital that would employ him but his bishop. Both sides have cobbled together a temporary compromise of allowing a priest chaplain to administer only to Catholic patients but this is unlikely to last as the ethos of spiritual care (to give the service its official designation) is generic and designed as a provision for all religions and none. The obvious tension is unstable.

So, with respect to your general thesis, I don't see any kind of "rent-a-chaplain" alternative building up in Scotland as a free-market supply device and cost-cutting excuse unless the centralising monolith that the SNP government has built in the NHS here is broken up by any future unionist rule post referendum settlement. My general point here is that your thesis for the other parts of the UK NHS is commendable and correct but not for Scotland. This is not to underestimate the neolib impact on the entire fabric of public services through Britain, and maybe the writing is on the wall for Scotland too...independence or no.