When it comes to planning pay increases for both staff and partners in general practice, it’s essential to understand how these changes will affect your overall budget. This guide will help you break down the process step-by-step, ensuring you stay within your budget limits.
Key Considerations:
• This Budget Relates to Your Global Sum Payment: It’s important to remember that the funds for staff and partner pay increases are directly tied to your global sum payment. This means any potential increase needs to be carefully balanced against your available budget.
Step 1: Calculate the Cost of a Pay Rise
To calculate how much a pay rise would cost, follow these simple steps:
• Take your September payroll summary and locate the “cost to employer” figure. This includes National Insurance (NI) and pension contributions.
• Divide this total by 100 to find out how much a 1% pay rise will cost you.
It’s essential to keep in mind that this figure represents the cost across your entire contract, covering all staff but not Partners.
Step 2: Compare Pay Rise Scenarios
Once you have your 1% cost figure, you can now compare the cost of various potential pay rises:
• Cost out pay rises ranging from 1% to 6% and compare each scenario to your available budget.
• Determine at what point your practice would run out of budget. This is critical because if you allocate too much for pay rises, there may not be enough funds left for partner increases (profits).
Step 3: Consider Staff vs Partner Pay Increases
If your budget is tight, be aware that your partners may not see any increase in their profits if most of the funds are allocated to staff pay. The British Medical Association (BMA) believes that, on average, 50% of the increase will go to staff. However, this can vary significantly depending on the staff-to-partner mix within your practice.
Step 4: Communicate Clearly with Your Accountant/Payroll Provider
When deciding on a pay increase, it is vital that you provide clear instructions to your accountant or payroll provider. Make sure they understand that the increase is a gross percentage increase. The actual amount staff members receive will be less due to deductions like National Insurance and tax. Clear communication will ensure the right calculations are made, and no unexpected shortfalls occur.
By carefully calculating the costs and comparing different pay rise options, you can ensure that both staff and partners benefit from any available budget, while also maintaining the financial health of your practice. Remember, careful planning and clear communication are key to balancing these increases effectively!