“NHS in ‘Mexican standoff’ with locums due to new tax rules”

The press release below is not well constructed. It gives the impression that self- employed people in the NHS are refusing to work because they are being forced to have tax deducted by the NHS.

It is rather more complex. Indeed, the NHS WILL deduct taxes BUT the contractors will NOT gain any benefits of being a direct employee – i.e. no sick pay, pension contributions or holiday entitlements.

They will be treated as employees for tax purposes but not as employees for any other purposes. They will have the obligations of employees, but not the rights.

-New tax regulations for off-payroll staff come into force on Thursday
-Some locums and temporary staff are refusing to work at NHS trusts

-Trusts face “Hobson’s choice” over locums’ pay demands, says finance director

-Medical director says NHS “must hold the line” on pay cap

The NHS is in a “Mexican standoff” with locum doctors, agency nurses and private contractors, with some threatening not to work when new tax rules come into force this week; some locum doctors are demanding uplifts of more than 50 per cent in their pay as NHS trusts take on responsibility for paying their tax and national insurance from Thursday, under new IR35 regulations from HM Revenue and Customs.

-In one example of the problems facing the NHS, IT contractors walked away from working on a multimillion pound project at Guy’s and St Thomas’ Foundation Trust rather than accept the new rules.

-At Blackpool Teaching Hospitals FT, 14 locums are refusing to show up for work on Thursday. This was revealed in an email to trust consultants, appealing for help to fill gaps. One consultant described the situation as a “disaster”. The trust had not responded.

-In other trusts, substantive staff are being asked to work extra shifts.

Trusts have cancelled non-mandatory training time, consultant supporting professional activities time and have suspended secondments so staff can work on wards.

Some trusts have prepared processes used during last year’s junior doctors’ strike to respond to any significant staffing shortfalls.

The IR35 regulations apply to any temporary staff being paid through a personal service company and could reduce income for temporary staff by more than 20 per cent.

One NHS finance director said: “It is akin to a Mexican standoff. Some locums have been asking for between 30 and 50 per cent price uplifts. More than likely we will have to pay this; it is a Hobson’s choice.”

NHS Improvement said it was working with trusts to resist any demand for higher pay because of the new rules and added it would work with NHS trusts to try and tackle the culture that led to locums charging high rates.
Some trusts have longstanding relationships with locum doctors and agency nurses to maintain staffing in key specialties such as emergency departments, intensive care and medicine.

An email to a trust director at a hospital in the South West, said three locums were putting pressure on the trust to increase pay by more than 56 per cent.

The email said: “All three have advised their agency that they will only be working with us if a pay rate of £95 is agreed, meaning the total charge would be £100 per hour. They were all previously on total charge rates between £64 and £69.”

An FT medical director at a different trust said: “We have had some locums who have joined our substantive staff, some have agreed the lower rates but some have said they are taking a two week holiday at the start of April and will see how it plays out before making a decision.”

They added: “Some individuals and agencies are playing games. Locums will play trusts off against each other and some of these people are quite prepared to travel long distances. The first two weeks in April will be crucial. If the NHS can hold the line, then we might see a change in the market.

“But if one trust breaks the cap for one doctor in one ward then it will fail. We need to all hold the line on this.”

At Guy’s and St Thomas’, 35 contractors working on a £16m IT project to update the trust’s Windows XP system left the project last month.

A trust spokesman said they left because of the IR35 regulations and efforts by the trust to replace their contracts with permanent staff. He said the trust was under a legal duty to comply with IR35 rules and provided the contractors with “clarity” about this. “It was then a matter of personal choice if contractors left the trust as a result of these changes,” he added.

Chris Hopson, chief executive of NHS Providers, said: “A number of our members have reported that some contractors are seeking to put pressure on them to pay more or interpret the rules more generously than they should be. This is a concern as every trust wants to guarantee safe care at a time of workforce shortages…

“The law is the law. As we have seen with issues such as agency rates that when the whole sector acts collectively it can be more effective. There could well be immediate impacts on rotas, which means that NHS Improvement needs to stand ready to support trusts to overcome these.”

An NHS Improvement spokeswoman said: “We’re absolutely clear that the NHS shouldn’t be picking up the tax liability or costs for individual agency staff – that’s not fair or right for patients and goes against the grain of what we know many nurses and doctors believe in. Any trusts that see locums increasing costs in this way should talk to us and we will support them to resist this.”

She said the regulator was offering trusts direct support including sourcing staff from other local providers to work shifts. She added: “We are working with medical directors and agencies to try and tackle the culture that’s behind locums charging high rates and bring about longer term improvement.”


One thought on ““NHS in ‘Mexican standoff’ with locums due to new tax rules”

  1. I was an IT contractor for several years, so I understand what it is like to be a contractor and also about IR35.

    The concept of IR35 (or at least it was when it was introduced) was to stop people leaving a permanent job on a Friday and returning as a long-term contractor (who would pay less tax) on the following Monday. It is right and proper that this type of Friday-to-Monday arrangement should be stopped, but the government seems to have forgotten that other contractors (such as Locum doctors) don’t get the same rights and benefits.

    So they don’t get sick pay, or paid holiday or maternity leave or an NHS pension or any other perks, they don’t necessarily have work to go to every day – so when they do work they need a rate that makes up for it) etc.

    I am not sure what changes are being made to IR35 tomorrow, but assuming that Locum doctors are being made to pay employers and employees NI (which is more than employees have to pay) and can’t claim tax relief for e.g. travel to work many miles away and possibly for accommodation costs for living away from home) I am not surprised that they expect higher pay per day than a permanent employee and are now asking for a rise to cover the loss of money IR35 implies.

    SO DON’T FALL FOR THE NHS LINE THAT THESE ARE MONEY GRABBING OPPORTUNISTS. They work in an extremely stressful environment, and (as Owl says) don’t get any of the rights of permanent staff.


    1. The IR35 regime was brought in because the government had been encouraging contractors to incorporate as Ltd companies. But they didn’t like the consequences.

    2. It was widely considered one of the most controversial and worst pieces of legislation ever because it was full of grey areas and inconsistencies and contractors were expected to know what the contract their agency had with the employer without being allowed to see it.

    3. IR35 never actually achieved any net tax income – because it’s complexity required a lot of administration by HMRC, and appeals were very common because of its grey areas and inconsistencies.

    3. Enforcing it for the NHS grabs tax with one hand that, even if they “hold the line” in the short-term, will eventually be balanced by increased payments to consultants – so what exactly was the point of it?

    4. BIGGEST IRONY – the government is trying to stop individuals who take risks with finding work from paying less tax whilst at the same time encouraging firms like Virgin Healthcare to take contracts and syphon huge profits off-shore to pay for Richard Branson’s next Caribbean Island.


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