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Calculating the true cost of staffing

July 11, 2019 by Practice Index in GP Practice Management, Staff

As we’ve written about in detail before on the Practice Index Blog, few things cause practice managers more concerns than staffing – especially the cost of it. It’s no surprise either, given the size of a practice’s wage bill.

A recent question posed on the Practice Index Forum brought the topic to the fore – with one PM asking if there are any useful ways to work out the ‘actual’ cost of employing a member of staff, including costs for admin, training, pension contributions and employer National Insurance (NI) contributions.

‘Standard’ costs

A handy place to start, according to one response on the forum, is The Personal Social Service Research Unit (PSSRU), which publishes annual figures on the unit cost of health and social care staff. This publication – which can be found here – includes all built in costs that need to be factored in. These work out as:

  • 20.68% employer’s pension contribution from 1 April 2019 on any salary above the National Insurance Secondary threshold
  • 8% employer’s NI contribution for 2019-20

The employer’s pension contribution increased from 14.38% on 01 April 2019 to its current figure of 20.68%. While it’s worth pointing out that an adjustment to the global sum for this increased pension contribution was made, this increase is only for the first year, so the higher costs need to be taken into consideration in the longer term.

Other fixed costs to consider are Equipment required by the employee in order to do their job (think desk, computer etc.) and, in today’s subscription-based software and technology environment, the cost of additional user licenses. This varies on a person-by-person and practice-by-practice basis, of course.

Muddier waters

So far, it all seems relatively straightforward, but of course – as is always the case it seems for practice managers – all is not quite as straightforward as it might seem.

According to an HR recruitment firm that specialises in primary care, there’s more to take into account than the straightforward costs.

“It depends how deep into the costs a practice manager wants to go, but working out the total cost is complex – and is about more than just the fixed costs,” the spokesperson told us. “For example, what if an older member of staff has already drawn their pension? This means they’ll no longer be contributing. With money tight in GP practices, we’ve actually had requests from practices trying to take advantage of this situation.”

Training costs

Another complex area to consider is training. This generally falls into two categories – mandatory and discretionary or optional.

“Practices should have a pretty good idea of the historic costs of mandatory training, so should base budgets on that,” according to our HR spokesperson. “We advise practices to allocate these costs on a person-by-person basis in order to make future staffing decisions easier. This is especially the case given the more complex nature of filling gaps in staffing in today’s practices. For example, we’re seeing practices increasingly turning to more creative ways to fill GP vacancies – nurse practitioners, pharmacists etc. all require different training and therefore have a different cost attached.”

Where this is the case, PMs are encouraged to contact other practices to ask for their guidance – of course the Practice Index Forum is a good place to turn!

“Discretional training is a different matter – but a really important one,” adds the HR spokesperson. “The reason I say that is staff retention is vitally important for any practice. We all know about the problems of findings new staff because of the skills gap and the cost to recruit can be large, sometimes running into thousands of pounds. Then there’s the issue of onboarding and staff time.

“Therefore, the cost of additional training and its impact on staff retention shouldn’t be overlooked. It’s more of an investment than a cost, you might argue, but it should be factored in.

“The other point on this is that a practice might have a long-term succession plan in place to cover upcoming retirements. This again needs to be costed in. The same goes for recruitment of junior staff who are then placed into a training programme with an eye on them becoming senior down the line.”

Interestingly, on the Forum thread, one PM says that any additional training done by their practice’s staff is covered by a training costs agreement so that if they leave within certain periods they have to pay back the cost of any training on a sliding scale – just to ensure they don’t train staff into a new job elsewhere!

Flexible on pay

While on the topic of staff costs and retention, finding the right level of pay is also something to think about.

The recruitment of nurses into general practice is a good talking point here. An NHS Agenda for change document stated that general practice needs to compete with all healthcare sectors to maintain a highly skilled primary care nursing workforce and therefore it is essential that we address the variability of pay, terms and conditions.

Without Whitley, practices face a dilemma of what to do in order to determine fair salaries and other benefits, particularly as practices find themselves in competition with NHS employers (who will be offering AfC terms), or even other practices (who may also be offering AfC-related terms), for recruiting and retaining staff.

Overall then, while it is relatively straightforward to work out how much the ‘fixed’ costs of employing a member of staff are, it may be worth taking a more holistic approach to staff value for the good of the practice in the longer term.

How do you calculate your staff costs? Share your tips below or take it to the Practice Index Forum?

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