Background

1. Government has announced pay awards for Agenda for Change (AfC), medical and dental staff groups following recommendations from the NHS Pay Review Body (PRB) and the Review Body on Doctors’ and Dentists’ Remuneration (DDRB) respectively. Government also announced a pay offer for resident doctor staff (previously referred to as junior doctors, referred to as resident doctors in this document), which has been accepted by staff ballot and will now be implemented. NHS Employers has published pay and conditions circulars for relevant staff groups.

2. The consolidated uplifts in PRB and DDRB pay awards, for all staff groups except resident doctors, are expected to be implemented in staff pay from October 2024. It is expected that the pay deal and DDRB pay award for resident doctors will be implemented in staff pay from November 2024 at the earliest, and systems are therefore advised to prepare for implementation on this basis. NHS England will make direct payments to NHS trusts and foundation trusts (“NHS trusts”) for the estimated cost of the resident doctors pay deal that relates to 2023/24 backpay. The AfC pay award for 2024/25 also includes the introduction of an intermediate pay point at each of bands 8a, 8b, 8c, 8d and 9, which has now been ratified with the NHS Staff Council, and is expected to be implemented for relevant staff in pay from November 2024.

3. In addition, separate pay reform deals have already been implemented for consultants and specialty and specialist doctors (SAS) staff groups, in May 2024 and August 2024 respectively. As part of the consultants pay reform deal, the contractual entitlement to access an annual local clinical excellence award (LCEA) round has ceased and funding that has been used for consolidated LCEAs since April 2018 has been redeployed into remuneration for the new consultant pay scales. Consolidated LCEAs awarded prior to reform in 2018 will be retained. In the Revenue finance and contracting guidance for 2024/25, NHS trusts were instructed to hold in reserve (and not spend) any funding relating to LCEAs from 1 April 2024.

4. A previous version of this guidance was published in May 2024, setting out how the consultants pay reform deal will be funded and issuing an interim, indicative cost uplift factor to support NHS organisations to set income assumptions in financial reporting. It advised providers and commissioners to await the publication of further guidance following the 2024/25 PRB/DDRB pay awards to make in-year amendments to contracts.

5. This updated guidance therefore sets out the actions that commissioners and providers should now take to implement the 2024/25 PRB and DDRB pay awards, resident doctor pay deal, as well as consultants and specialty and specialist doctors pay reform deals, including guidance on how contracts should be amended in-year. It also explains how funding will be issued for the impact of the pay awards and pay deals.

Cash management

6. The following guidance sets out the steps that commissioners and providers should take to agree new contract values and payment schedules, so that the cost impact of the 2024/25 pay awards, as well as pay deals for consultants, SAS and resident doctor staff groups, including associated backpay for 2024/25, can be appropriately funded and thereby minimise the requirement from NHS trusts for additional cash requests.

7. Integrated care boards (ICBs) should engage urgently with NHS trusts in their system to identify the full cash requirements for the pay awards and backpay due in October and ensure that the combined cash requirement for the ICB and NHS trusts is included in the supplementary ICB cashflow forecast (CFF2) submission due by 9 October. ICBs and NHS trusts should seek to drawdown only the cash required to manage the cost impact of the Agenda for Change (AfC) and relevant Review Body on Doctors’ and Dentists’ Remuneration (DDRB) pay awards due in October (not including pay costs due to be incurred by organisations from November) in the CFF2 submission due on 9 October. ICBs will be asked to confirm in the CFF2 form for October the cash amounts that relate to pay awards and the staff groups they relate to.

8. ICBs and NHS trusts should also ensure that the cash requirement of the system for the implementation of the pay deal and DDRB pay award for resident doctors, as well as the additional intermediate pay point for some AfC staff, is included in the November ICB cashflow forecast (CFF1) submission for November, due on 16 October 2024.

9. Where the cash requirements of the system exceed the available resources of the ICB, the short-term cash requirements can be managed using the CFF1/CFF2 submission.

10. Any queries relating to cash support and CFF1 or CFF2 submissions should be directed to nhsenglandcash.management@nhs.net

Allocations

11. Allocation adjustments will be issued to the following allocations in 2024/25 to reflect the final updated cost uplift factor (CUF) (see table 1 in the following section). Allocation adjustments have already been issued in month 2 for the impact of the consultants pay reform deal, and a further set of adjustments will therefore be issued for the impact of the 2024/25 pay awards, as well as resident doctor and specialty and specialist doctors pay reform deals.

• Integrated care board (ICB) core programme (including Elective Recovery Fund) – covering all services in scope of the NHS Payment Scheme (NHSPS) delivered by NHS and non-NHS providers, and other services funded by ICB core programme impacted by Review Body on Doctors’ and Dentists’ Remuneration (DDRB) pay recommendations. The Mental Health Investment Standard will also be adjusted to reflect the additional funding.
• ICB delegated pharmacy, ophthalmic and dental services – to reflect the impact of the updated CUF for secondary dental services. The 2024/25 ICB dental ringfence values will be updated accordingly.
• Service Development Fund (SDF) – the SDF funding already notified to ICBs will be uplifted where appropriate to fund the impact of pay awards on pay costs.
• NHS England direct commissioning (including Elective Recovery Fund) programme allocations for specialised, public health, armed forces and health and justice services – covering all services in scope of the NHSPS delivered by NHS and non-NHS providers.

12. Adjustments to published 2024/25 allocations will be actioned through in-year reporting and processed as baseline adjustments in 2025/26 allocations.

13. The impact of additional pay on training and education income will be funded on top of the existing payments. We are working with the Department of Health and Social Care (DHSC) to formally implement this in an updated 2024/25 tariff. Further details about this will be communicated in due course.

14. Regarding pay for Public Health Grant funded staff working in local authorities and local authority commissioned public health services, including those who are employed on NHS contracts, DHSC is currently considering the funding needs for this alongside other funding priorities, and will provide further guidance for employers, including local authorities, in due course. Local authorities should work with the staff they employ and the organisations they commission to agree changes required following the pay awards through local commissioning arrangements. No funding will be issued through NHS England for these services.

15. No funding will be issued through NHS England for the impact of pay awards on research and development commissioned by the National Institute for Health and Care Research (NIHR). Any impacts on NIHR commissioned services will be managed through the contracted route with NIHR.

16. Additional non-recurrent funding will be issued to ICBs in 2024/25 to contribute to the impact of the pay awards on the parts of NHS trusts’ cost base which are funded by other non-NHS income (excluding education and training income, services commissioned by local authorities and research and development as set out above). The funding will be issued to ICBs on a host provider basis (to the ICB where each NHS trust is financially apportioned) and separately identified. The funding is calculated nationally and distributed based on the total pay bill for NHS trusts within the system. NHS trusts will need to secure funding on a recurrent basis from the relevant income sources from 2025/26.

17. Where changes are agreed to general practice and general dental services contracts following the announcement of DDRB pay awards, adjustments will be made for the impact of these contract changes to the ICB primary medical care and delegated pharmacy, ophthalmic and dental service allocations (for the impact on primary and community dental services, with ICB dental ringfence values updated accordingly). Where changes are agreed and allocation adjustments are made, supplementary guidance will be issued to ICBs.

18. Any changes to the maximum reimbursement amounts for additional roles reimbursement staff as a result of the AfC pay award will be set out in an update to the Network Contract DES 2024/25 specification.

19. The published ICB running cost allowances (RCAs) covering 2024/25 and 2025/26 will be updated to reflect the impact of the 2024/25 AfC pay award. The published figures do not include any allocation for the transfer of budgets to support delegated commissioning responsibilities in 2023/24. ICBs will therefore separately receive additional RCA in relation to the recurrent delegation staff transfer funding to reflect the impact of the pay award. ICBs will need to calculate and transact any inter-ICB adjustments to appropriately fund the locally agreed operating model for delegated commissioning responsibilities.

Payments and contracts

20. The previous version of this guidance (published in May to support the implementation of the consultants pay reform deal) included an interim, indicative cost uplift factor (CUF) value, which was issued to support NHS organisations with financial reporting requirements. The guidance advised commissioners and providers to await the announcement of 2024/25 NHS Pay Review Body (PRB)/Review Body on Doctors’ and Dentists’ Remuneration (DDRB) pay awards before amending contracts. The final updated CUF shown in table 1 below now includes the estimated cost impact of the 2024/25 pay awards (including the cost of new Agenda for Change (AfC) intermediate pay points), as well as pay reform deals for consultants (adjusted for the impact of the redeployment of existing funding for local clinical excellence awards, specialty and specialist doctors and resident doctor staff groups.

21. Where 2024/25 contracts have been agreed, commissioners and providers should – where necessary, as described in the guidance in the paragraphs below – now take action to vary the value of their contract, with reference to the updated net CUF in table 1. Where contracts have not yet been agreed between commissioners and providers, they should be agreed having regard to the updated net CUF in table 1 as required, as soon as practicably possible. Local NHS leaders will be relied on to work together to ensure issues relating to contract agreement are resolved collegiately and in a timely manner. NHS England regional teams will track local progress and help systems resolve issues where necessary.

22. Commissioner allocations, as outlined in the section above, will be adjusted to fund commissioners for the annualised impact of the change in the net CUF on services in scope of the NHS Payment Scheme (NHSPS), including for NHS and non-NHS providers.

Table 1: Updated 2024/25 cost uplift factor (CUF)

23. The following paragraphs (paragraphs 23 to 28) set out the payment rules that will apply with respect to the pay awards and pay deals for services in-scope of the NHSPS.

Aligned payment and incentive contracts

24. Where integrated care boards (ICBs) and NHS trusts have a contract operating on aligned payment and incentive (API) arrangements, ICBs should agree an adjustment to uplift the value of fixed payments for all inter-system contracts by the CUF change in table 1 to minimise negotiations and expedite the flow of funding to providers. API adjustments require NHS England approval (rule 3 of the aligned payment and incentive rules in section 4 of the NHSPS) and we confirm that all adjustments in accordance with the guidance are approved without the need to submit to NHS England. The CUF value is an annualised figure, and so ICBs should apply the updated CUF change against the total annual fixed element value to fund the back pay from 1 April 2024 and forward pay elements for the remainder of 2024/25.

25. For intra-system contract arrangements, between ICBs and NHS trusts that are apportioned to the same ICB for the purposes of financial reporting (see financial apportionment section of ICB and system finance business rules), systems may agree differential adjustments to the fixed element values to distribute the additional pay funding to address pay pressures as they are understood locally, considering sector and trust-specific factors, without requirement for approval from NHS England.

26. Updated unit prices, reflecting the updated CUF in table 1 will be issued. The variable element of API arrangements for elective services should be updated to reflect the updated unit prices and backdated to apply from an effective date of 1 April 2024, such that NHS trusts are funded for both the backdated and forward pay elements. Updated elective services baselines will be issued reflecting the final unit prices.

Contracts operating based on NHS Payment Scheme unit prices

27. ICBs and providers should use the updated unit prices, which will be issued shortly, rather than the prices in annex A of the NHSPS (amended) published on 27 March 2024. The updated unit prices should be applied from 1 April 2024 and payments should be backdated accordingly. Commissioners and providers will need to keep open, for at least quarter 1 of 2024/25, the financial reconciliation process under service condition 36 of their NHS Standard Contract, beyond the date by which all payments for the quarter would normally have been signed off.

Contracts with non-NHS providers operating based on local prices

28. ICBs also have contracts with non-NHS providers operating on the basis of locally agreed prices (see the local payment arrangement rules in section 7 of the NHSPS). The requirement to adjust these contract values in-year for changes to pay costs will depend on the locally agreed terms of the contract. For example, where a contract stipulates that prices are to be adjusted for the impact of new inflationary pressures, such as the announcement of NHS pay awards or a change to the value of the net CUF, then ICBs should vary the value of the contract accordingly.

29. Some non-NHS providers employ some or all of their staff on AfC terms and conditions and will be directly affected by the AfC pay award. Where this is the case, ICBs may consider whether agreed local prices should be adjusted in-year to reflect the specific impact of the pay awards on the affected staff at the provider.

Low volume activity

30. Updated low volume activity (LVA) values for ICB core, delegated secondary dental and delegated specialised services (where these apply to ICBs which have taken on delegation in 2024/25) will be issued, in line with the final updated CUF in table 1, alongside the updated unit prices. ICBs should make all LVA payments to providers in a timely way, including where early payments have been made and a further payment is now required for the differential value in the updated LVA values. Where the impact of the final updated CUF inflates any values to an amount above £500,000, these will still be treated as an LVA arrangement and ICBs and NHS trusts do not need to agree contracts for 2024/25.

Contracts with NHS Wales

31. This approach is intended to be replicated in Wales to ensure that pay awards and other pay deals in both England and Wales can be funded in cross-border relationships. Where commissioners in Wales use NHS trusts in England to arrange services, payment values should be uplifted by the updated CUF value in table 1 and the updated unit prices. Similarly, English commissioners using Welsh providers will be expected to fund equivalent uplifts when pay awards are announced in Wales.

Financial reporting

32. Integrated care board (ICB) and NHS trust final plans were submitted on 12 June 2024 and will be used in monthly finance returns. Guidance has already been issued to NHS organisations that includes financial reporting instructions for the implementation of consultants and specialty and specialist doctors pay reform deals in May 2024 and August 2024 respectively. The adjustments to 2024/25 commissioner allocations set out in the allocations section above will be actioned for M7 (October). Commissioners and NHS trusts should account for the income and expenditure impacts from the NHS Pay Review Body and Review Body on Doctors’ and Dentists’ Remuneration pay awards, as well as resident doctor pay deal, from their M7 (October) financial reporting returns. Where they have yet to agree updated contract values, commissioners and NHS trusts should report variable payments uplifted for the final updated cost uplift factor value in table 1 to avoid artificial deficits or surpluses in financial reporting. Variances from final plans due to the pay award will be captured through the in-year reporting process.

Queries

33. Queries related to this guidance which cannot be resolved through local discussion or discussion with the relevant NHS England regional team should be directed to england.finplan@nhs.net.

Publication reference: PRN01555