Contract Reforms (DDRB July 2015): Modelling the effect on ... - aagbi

Contract Reforms (DDRB July 2015): Modelling the effect on Junior Doctor Pay during Specialty Training Dr Steven Bishop [email protected] Academic Clinical Fellow in Anaesthesia Specialty Registrar in Intensive Care Medicine Cambridge University Hospitals NHS FoundaQon Trust Version 0.1 (draS) – 2nd August 2015

Overview 1.  Overview of current contract and proposed changes 2.  My financial model 3.  Effect of proposed changes to basic pay progression (Scheme’s A – C) 4.  Effect of Scenario’s A-‐C+: basic pay percentage upliS and reward of OOH Qme 5.  Effect on pensions 6.  Effect on student loans 7.  Comparison across acute specialQes 8.  Modelled data from the East of England 9.  Overall outcome for anaesthesia 10.  Conclusions 11. Next steps…

1. Current Trainee Contract •  Currently remunerated from StR pay scale (Points 0-‐9). Pay point depends upon Qme in NHS service (based upon salary increment date) •  A doctor who progresses smoothly from FY to ST training without Qme out of training (e.g. OOPE, mat leave) will have a direct mapping from training grade to StR pay point (e.g. CT1 = StR-‐0; CT2 = StR-‐1 etc) •  Possible (and not unusual) to have doctors at the same training grade with different base pay Basic Pay -‐ Exisi,ng 2015 Pay Circular4 Point Base Salary StR-‐0 £30,002.00 StR-‐1 £31,838.00 StR-‐2 £34,402.00 StR-‐3 £35,952.00 StR-‐4 £37,822.00 StR-‐5 £39,693.00 StR-‐6 £41,564.00 StR-‐7 £43,434.00 StR-‐8 £45,304.00 StR-‐9 £47,175.00

Basic Pay -‐ by grade Anaesthesia Anaesthesia post-‐ACCS Grade Base Salary Grade Base Salary CT1 £30,002.00 CT1 £30,002.00 CT2 £31,838.00 CT2 £31,838.00 ST3 £34,402.00 CT2 Anaes £34,402.00 ST4 £35,952.00 ST3 £35,952.00 ST5 £37,822.00 ST4 £37,822.00 ST6 £39,693.00 ST5 £39,693.00 ST7 £41,564.00 ST6 £41,564.00 ST7 £43,434.00

1. New Contract •  DDRB have recommended a number of pay models that are open to discussion. There are three main aspects: (a)  Changing the current system of basic pay progression (b)  Increasing basic pay and altering the way OOH’s work is remunerated (by removing banding supplements) (c)  Defining normal Qme as Mon-‐Sat 7am-‐10pm

•  Read the DDRB July 2015 document for full details of the proposals!

1. New Contract •  (a) Change to basic pay progression –  DDRB recommend just 3-‐4 increments in basic pay across the whole of specialty training, i.e. the same basic pay for longer periods of training –  Three different scheme’s have been proposed by the DDRB to reflect increased basic pay with increased seniority –  Scheme B is a good match (in principle) for training in Anaesthesia (cf. basic, intermediate, higher and advanced training) Scheme A

CT1/2

Scheme B

CT1/2

Scheme C

CT1/2

ST3 ST3/4

ST4/5/6

ST7/8

ST5/6

ST7/8

ST3/4/5/6

ST7/8

1. New Contract •  (b) Increased basic pay and altering OOH remunera,on: –  4 different plans have been released, called Scenario’s A, B, C and C+ –  They all have a different balance between increased basic pay and increased OOH pay –  OOH work will be based upon hours worked and paid at normal Qme, 1.33x normal Qme or 1.5x normal Qme depending upon the scenario chosen Percentage Pay Increase Scenario A Scenario B Scenario C Scenario C+ Basic Pay UpliD 19.10% 17.50% 15.30% 14.90% Unsocial Increase (Sunday) -‐ 33.00% 33.00% 33.00% Unsocial Increase (Night 10pm-‐7am) 33.00% 33.00% 50.00% 50.00%

1. New Contract •  (b) Increased basic pay and altering OOH remunera,on: There has been substanQal negaQve commentary in social media regarding the DDRB comparing medicine to other industries (including fast food, shop workers etc) when selng the OOHs premium of 33% and 50% normal Qme pay. Personally I don’t object to these rates for OOHs work and think they are fair, provided our rate of basic pay is set at an appropriate level to reflect and respect our training and professional responsibility Percentage Pay Increase Scenario A Scenario B Scenario C Scenario C+ Basic Pay UpliD 19.10% 17.50% 15.30% 14.90% Unsocial Increase (Sunday) -‐ 33.00% 33.00% 33.00% Unsocial Increase (Night 10pm-‐7am) 33.00% 33.00% 50.00% 50.00%

2. My Financial Model •  I built a large macro-‐based financial modeling system in Excel •  It encodes the current pay scale and the proposed new pay scheme’s and scenario’s •  It includes calculators for Income Tax, Contracted-‐out NaQonal Insurance, NHS Pension ContribuQons and Student Loan DeducQons •  It is highly customizable – opQons for: –  details of actual or mean rota/post banding % –  mean weekly hours worked, mean weekly Sunday hours (7am-‐10pm) and mean weekly night hours (10pm-‐7am) –  Availability allowance and RRP –  Tax personal allowance –  Student loan: choose whether to deduct from salary or not; current loan interest rate –  Pension calculator: can select which parts of new pay model are pensionable pay

•  It calculates the effect of each new scheme/scenario and compares it to the current pay banding system: –  Compares gross pay, net pay, pension and student loan effects –  Looks at cumulaQve effects (gains or losses) over each training year and the whole of training

2. More on modelling •  The model requires as input both current banding and hours worked per week. I have modeled this in two ways: 1.  Extracted the mean banding and mean weekly/ Sunday/night hours from Figure 4.1 of the DDRB July 2015 report (as these appear to be reasonably representaQve of the named specialQes) 2.  Compared this to real Anaesthesia, Obs/Gynae, Medical and A+E rota’s in the East of England

2. The Model •  Once I have finished ‘tweaking’ the model I will share it with the BMA and Royal College’s. •  I will also make it available for general release on the www and via social media so that interested trainee’s can understand the proposals in more detail. •  I have also produced an algebraic model of the proposed pay reform that demonstrates the relaDonship between the new pay schemes, working hours and rota design. I plan to publish this in due course.

3. Effect of changing pay progression •  The DDRB document DOES NOT indicate values for the actual base salaries that would be awarded for each increment point in the new pay schemes. I have assumed that these will be paid at the minimum exisQng pay point in each of the new bands (based on the StR-‐x scale) before the percentage basic pay increase is applied, e.g. Scheme B before the % increase: –  CT1/2: £30,002 ST3/4: £34,402 ST5/6: £37,822 ST7/8: £41,564

•  However, my model does allow this to be changed. OpQons include minimum pay point, mean pay point or maximum pay point or custom. E.g. Scheme A ST4/5/6 could be set to Mean(current ST4/5/6 basic pay), Max(current ST4/5/6 basic pay) or a custom defined value.

3. Effect of changing pay progression •  • 

The new basic pay increment schemes have a HUGE impact on gross (and net pay) over training. Impact on total gross pay over training (CT1 -‐ ST7) for Anaesthesia: Minimum pay point Mean pay point Maximum pay point

•  • 

Scheme A -‐£23,628 -‐£11,742 £144

Scheme B -‐£20,523 -‐£11,743 -‐£2,963

Scheme C -‐£30,222 -‐£11,288 £7,647

(using DDRB Fig 4.1 data for Anaesthesia hours and banding and picking the worst Scenario A-‐C+ in each scheme)

For specialQes with substanQal OOH work the final choice of Scheme is important. Scheme B is the best by far for acute specialQes like Anaesthesia (based upon all the scenario’s I have run through the model) It is vitally important to know in advance what the actual base salary will be for the new increment points. If the new bands are set at the current minimum StR-‐x equivalent for the band (minimum pay point) then this would result in a very significant pay cut over training. I strongly believe that the maximum pay point used above is an unrealisHc scenario and would not be awarded by the DDRB within the current overall pay envelope (but is included here for comparison)

Model assumpQons 1.  New pay increment schemes: each pay increment band is paid at the minimum current StR-‐x equivalent within the band (worst-‐case analysis or minimum pay point analysis; see previous two slides) 2.  Pensionable pay: under the current junior doctor contract only basic pay (not banding) is pensionable. I have assumed that only upliSed basic pay remains pensionable (although my model on changing one configuraHon opHon will also model the effect of addiHonal hours, Sunday hours, night hours, availability allowance and/or RRP becoming pensionable pay) 3.  Student loan: by default it assumes trainee’s are repaying a Tier 1 Student Loan via PAYE and the loan interest rate is 1.5% (although both these opQons can be changed)

4. Effect of Scenario’s A-‐C+: basic pay percentage upliS and reward of OOH Qme •  Modeling the effect of these 4 scenarios that affect the rise in basic pay and the remuneraQon of out of hours work:

Percentage Pay Increase Scenario A Scenario B Scenario C Scenario C+ Basic Pay UpliD 19.10% 17.50% 15.30% 14.90% Unsocial Increase (Sunday) -‐ 33.00% 33.00% 33.00% Unsocial Increase (Night 10pm-‐7am) 33.00% 33.00% 50.00% 50.00%

4. Effect of Scenario’s A-‐C+: basic pay percentage upliS and reward of OOH Qme • 

Effect on Anaesthesia: cumulaDve gross and net pay over CT1-‐ST7 training using data from DDRB Fig 4.1 compared to current banded pay scheme (assumpQons: new pay scheme set to minimum pay point, only upliSed basic pay is pensionable and Tier 1 student loan deducted) Gross Pay Net Pay Difference Difference Scheme A

Scheme B

Scheme C

•  • 

Scenario A Scenario B Scenario C Scenario C+ Scenario A Scenario B Scenario C Scenario C+ Scenario A Scenario B Scenario C Scenario C+

-‐£23,472 -‐£23,628 -‐£22,336 -‐£23,540 -‐£20,366 -‐£20,523 -‐£19,219 -‐£20,433 -‐£30,069 -‐£30,222 -‐£28,954 -‐£30,135

-‐£15,075 -‐£14,923 -‐£13,933 -‐£13,612 -‐£13,694 -‐£13,540 -‐£12,542 -‐£12,226 -‐£18,009 -‐£17,859 -‐£16,887 -‐£16,556

A big loss of income during training! The relaQve differences between Scenario’s A-‐C+ are also demonstrated when modeling other acute specialQes with OOHs commitment (although the absolute figures vary). Scenario’s C+ (and C) are the best opQons and demonstrate the smallest pay cut to specialQes with a substanQal OOH commitment (although there are caveats – see SecQon 11 of this slide set)

5. Effect on pensions •  An upliS in basic pay increases pensionable pay and places the trainee in a higher pension contribuQon Qer at an earlier stage of training (without a headline change in the published pension contribuQon rates). Thus trainees will make more pension contribuQons over training. •  Effects for Anaesthesia over training CT1-‐ST7 (assumpQons as previously): Increase in Pension Contribu,ons

Scheme A

Scheme B

Scheme C


£5,222.60 £4,838.50 £4,310.37 £2,686.13 £5,465.17 £5,077.82 £4,545.21 £2,920.14 £4,707.55 £4,330.37 £3,811.76 £2,189.24

(note the wide variability: this is due to increased basic pay pushing some scenario’s into a higher pension band earlier in training, with contribuHons rising immediately from 9.3% to 12.5%!)

5. Effects on pensions •  Despite pension contribuQons increasing this does not result in increased deferred pension benefits (i.e. a larger pension) at reQrement •  Current pension scheme is career-‐averaged and thus benefits at reQrement are related to career-‐average pensionable pay. The proposed changes in basic-‐pay progression (Scheme’s A-‐C) cause the mean basic (pensionable) pay over training to decrease (again modeled on Anaesthesia as previously): Change in Mean Pensionable Pay over Training Scheme A

Scheme B

Scheme C


-‐£3,353.21 -‐£3,375.50 -‐£3,190.82 -‐£3,362.81 -‐£2,909.38 -‐£2,931.87 -‐£2,745.53 -‐£2,919.06 -‐£4,295.58 -‐£4,317.45 -‐£4,136.29 -‐£4,305.00

•  Thus, greater pension contribu,ons for a smaller pension at re,rement

6. Effect on Student Loans •  Reduced gross pay results in smaller student loan repayments. Over specialty training less student loan is paid down with accumulated compound interest as a result. •  Modeling Anaesthesia with the same assumpQons as previously (plus using current (and very conservaQve) student loan interest rate of 1.5% over 7 year model period): Underpaid student loan (with compound interest) Scheme A

Scheme B

Scheme C


-‐£2,174.43 -‐£2,188.91 -‐£2,068.89 -‐£2,180.66 -‐£1,891.55 -‐£1,906.16 -‐£1,785.08 -‐£1,897.84 -‐£2,782.79 -‐£2,797.00 -‐£2,679.26 -‐£2,788.91

7. Comparison across acute specialQes •  Using the model assumpQons as stated earlier, Scheme B and Scenario C+ are the most favourable for the acute specialQes that partake in substanQal OOH work (subject to some caveats; see SecQon 11 of this slide set) •  (this is in broad agreement with the DDRB proposals which state that Scheme B and Scenario C/C+ are their preferred opQons) •  I have used Scheme B/Scenario C+ to compare the effects between specialty groups.

7. Comparison across acute specialQes

AssumpDons: Scheme B, Scenario C+. Specialty banding, weekly hours, availability supplement and RRP are extracted from DDRB Fig 4.1. Basic pay for Scheme B pay bands is set at current StR-‐x equivalent minimum (worst-‐case analysis / minimum pay point). Pensionable pay is upliYed basic pay only. Tier 1 Student loan deducHons are deducted

7. Comparison across acute specialQes

AssumpDons: Scheme B, Scenario C+. Specialty banding, weekly hours, availability supplement and RRP are extracted from DDRB Fig 4.1. Basic pay for Scheme B pay bands is set at current StR-‐x equivalent minimum (worst-‐case analysis / minimum pay point). Pensionable pay is upliYed basic pay only. Tier 1 Student loan deducHons are deducted

7. Comparison across acute specialQes •  Why does Anaesthesia fair so badly? –  It doesn’t receive any of the availability supplement (as we are never on call from home as trainees) or RRP like the other specialQes –  If A+E didn’t receive these they would receive an equivalently sized pay cut…

•  QuesQon to the reader: does the new contract fairly reward high-‐intensity out of hours work?

8. Modeled data from the East of England

•  This is work in progress and will be released soon; although iniQal results are in-‐line with the data modeled using DDRB Fig 4.1 extracted values already shown

9. Overall outcome for anaesthesia

AssumpDons: Scheme B, Scenario C+. Specialty banding, weekly hours, availability supplement and RRP are extracted from DDRB Fig 4.1. Basic pay for Scheme B pay bands is set at current StR-‐x equivalent minimum (worst-‐case analysis / minimum pay piint) and compared with bands set at StR-‐x maximum (best-‐case analysis / maximum pay point). Pensionable pay is upliYed basic pay only. Tier 1 Student loan deducHons are deducted Note: I believe the best-‐case analysis is unachievable -‐-‐ increasing the pay bands to maximum StR-‐x equivalent (best case analysis) would increase the overall ‘gross pay envelope’, which is something the DDRB is not allowed to do in its remit.

10. Conclusions • 

The contract reforms have the potenQal to be financially disastrous for doctor’s in training. The DDRB Contract Reform document is decepQve; it’s illustraQons (parQcularly Fig 4.1) are designed to hide the true negaQve financial impact over a doctor’s Qme in specialty training. The DDRB report only demonstrates the effect of the contract changes over a one year period (where per their remit the overall gross pay envelope should remain the same) – they fail to take into account the changes in the pay progression structure which has a much greater negaQve impact over the course of training than the mechanics of how OOH work is rewarded.

• 

The degree of disaster depends upon a few variables: –  – 

• 

The pay progression scheme and upliS/OOH scenario used The basic pay award assigned to each increment in the new pay schemes (This alone can negaQvely influence cumulaQve gross pay over training to the tune of £30,0000. In addiQon, the basic pay award and increment structure influences when in training you move up to the next pension contribuQon Qer, paying more in pension contribuQons (for less deferred benefit) with a reducQon in net pay). Overall Scheme B and Scenario’s C/C+ are the most beneficial to the acute specialQes, HOWEVER the situaQon changes if the basic pay awards are markedly higher than the minimum assumed values used in my analysis [see next slide]

Anaesthesia fairs poorly compared to other acute specialQes –  –  – 

Using DDRB data on banding and hours, cumulaQve net (take-‐home) pay for anaesthesia over 7 years of training (CT1 to ST7) would reduce by £12,200 [equivalent to a reducHon in net (take-‐home) pay of £95/month at earlier stages of training and £220/month at higher stages!] Once the reduced student loan payments (and resultant cumulaQve interest) are accounted for this results in an overall net loss of up to £19,500 over 7 years. Other acute specialQes all see cuts in gross and net pay but to a lesser extent; equivalent specialQes such as A+E and Obs/Gynae are largely protected by their availability/RRP supplements

• 

The proposed reforms result in increased pension contribuQons over training for less deferred benefit at pensionable age

• 

Student loan repayments are reduced; loans will take longer to pay down and will accumulate more interest. For current trainees with Tier 1 loans this is less of a problem whilst interest rates are low (1.5% for Tier 1 loans at the Qme of wriQng). In the future, trainees with large Tier 2 loans (that include tuiHon fees of £9000pa) and are esHmated to total around £55,000, may fair worse. Interest rates for these loans are much higher (currently 5.5%) and they will be in repayment for longer.

• 

The contract reforms also recommend a reducQon in annual leave enQtlement: this results in more work for the same pay. The effects of this have not been factored into my model (although this would be simple to do).

11. Next steps… What we need to know to provide an informed reply to the reforms (and the DDRB must clarify these ASAP): 1.  The actual basic salary awarded at each increment point in the new pay schemes A to C: – 

2. 

The choice of new pay progression scheme (and the actual basic pay award for each increment point in the new scheme) greatly influence the benefit/loss trade-‐off between the different upliS/OOH scenario’s. Scheme B/Scenario C+ appears to have the least negaQve impact for the acute specialQes (which is in line with the DDRB’s preferred opQon), although if this were chosen without a pre-‐published and agreed salary scale the DDRB would be free to choose a salary scale that had a greater than predicted negaQve impact on gross/net pay over training (and hence a different scheme/scenario might have been more beneficial with the pay award). Thus it is impossible to state with any certainty which scheme/scenario combinaQon has the least impact on a given specialty unQl the full pay scale informaQon is published.

Which components of the new pay scheme are pensionable –  – 

3. 

My model assumes that only the upliSed basic pay is pensionable However if any of the other components of gross pay are pensionable (addiQonal hours above 40 hours, Sunday hours, night hours, availability allowance, RRP) then the conclusions of this modeling exercise are very different: pension contribuQons massively increase (with a much earlier jump from 9.3% to 12.5% pension contribuQons during training) and reduced cumulaQve net pay. The trade-‐off between the different Scheme’s and Scenario’s is also affected and would change the benefit/loss trade-‐off of each.

How alternaQve training routes (e.g. ACCS or dual-‐training in ICM) will fit into the new pay scheme’s and hence when basic pay increments will occur, e.g. Will the CT2A year in ACCS Anaesthesia be paid at the CT1/CT2 ‘core-‐training’ basic pay rate or the equivalent ST3/4 ‘junior SpR’ rate –  For ST3+ trainees dual training in ICM, when will registrar pay progress up the increment scale? These factors have a large impact in cumulaQve net pay for trainees who are on longer training programmes that don’t fit neatly into the ST1-‐ST8 brackets proposed, but their addiQonal training, skills and knowledge should be recognized through pay progression. – 

I strongly believe that at the very minimum QuesDons 1 and 2 above are clarified by the DDRB before further negoDaDons conDnue. Without this informaDon it is impossible to reach any firm conclusions about the proposed changes and how they impact different specialDes.