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How to manage your staff budget

With salaries being the biggest expense in any practice, there is increased pressure to manage staff costs effectively. Fiona Dalziel provides advice on how to do this.

It's a good idea to establish a pay scale and use it when recruiting (Picture: iStock)
It's a good idea to establish a pay scale and use it when recruiting (Picture: iStock)

Salaries are by far the largest outgoing in any practice, and with income being squeezed year on year the pressure to manage the staff budget is really piling up.

With the introduction of the current contract ring-fenced, identifiable staff reimbursement came to an end. Many practices missed the opportunity to establish an in-house staff budget when this happened, and for many this has meant a loss of control and an invidious pattern of unchecked increases in staff costs.

What action should practices take now, at the beginning of a new and even more challenging financial year?

Have a budget

This is not difficult to establish. Simply taking last year’s costs and agreeing that they should not increase this year would be a good first step.

Your payroll software or payroll company will be able to supply an electronic summary of staff costs. The format may already be acceptable or you could transfer these onto your own monitoring spreadsheet. This is most helpful if it is broken down by team per month, for example:

  • Management
  • Admin and reception
  • Nursing and HCAs
  • Overtime
  • Agency staff
  • Nursing locums
  • GP locums

Set up your spreadsheet so that a column shows the budget and the cumulative variance (plus or minus) against the budget.  Make sure that this is shared monthly with the partners.

Look back at the accounts

Once you are monitoring the numbers, it is time to take action to manage expenditure. A good starting point is comparing the last few years’ accounts, asking the following questions:

  • How do our staff costs compare with other practices’? (Specialist medical accountants should be able to supply you with benchmarking figures).
  • If your costs look high:
    • Do you have high staff turnover? (This will show as high advertising costs and you will be aware of resignations and constant recruitment)
    • Do you have high levels of sickness absence? Why?
    • Are you paying lots of overtime or agency staff? What for?

Keep asking the questions. Try to identify trends and causes, and agree action to tackle the problem areas.

What next?

At the root of good staff budget management is good staff management. Partners and managers should work together on the following:

Establish a clear pay scale
The lack of a pay scale can result in a loss of equity and an increased risk of inconsistency and unfairness. Establish a practice pay scale and use it when recruiting.  

Identify which grades on the scale are appropriate for which roles and how many incremental points there are in each grade. You can look at Agenda for Change rates for comparison. Take advice if introducing this might in any way impact on the terms and conditions of existing staff.  

Review your recruitment policy
Any change in your staff team is an opportunity to review what is going on. Your automatic reaction should be: when we have a vacancy, we review the post. Consider the following:

  • What was the cost of the post?
  • Can some or all of the role be absorbed elsewhere in the team?
  • If it is a straight replacement, can we replace the outgoing individual with someone who will cost less?
  • What is the most cost-effective way of advertising this post?

Actively manage staff roles and activity
None of the above will be as effective if you do not already know, in detail, what each team member does, how effectively they do it, and how much they cost. This groundwork does take some time and energy but will pay off in the long run by identifying opportunities where you can make changes to reduce cost.

  • Make sure each post has an up-to-date job description
  • Use the elements of the job description to regularly review, by collecting data, what every team member actually does, how much of it they do and how much time they spend on it. Introduce this activity sensitively and in consultation with your team and acknowledge the extra time it will take them to record what they are doing for a (brief but sufficient) period of time. This might be an annual activity.
  • Use the data collected (which will not be perfect) to help match individuals’ aptitudes to the tasks they do and improve efficiency.
  • Manage absence and performance effectively. If you feel your team lacks the skills and knowledge for this, get training. You cannot maximise staff efficiency if poor performance is accepted and you have high levels of sickness absence that is uncontrolled.
  • Identify opportunities to cut surplus staff hours or reallocate workload. For instance, your phone system may be able to produce data about telephone workload and you may identify consistently quiet times. Could you manage with fewer staff at that time, or could they do other tasks?

Plugging the gaps
Have a fresh, hard look at how you cover times of staff shortage.Review your overtime policy. Overtime should only be paid if all other options have failed and you should have a system of authorising and recording it.

Avoid locums and agencies if at all possible. Move staff hours around to compensate, use internal locums, and use time in lieu in preference.

Pay awards and bonuses
If you have consistently paid these, then the decision not to pay them may become a contractual issue. However, this is dependent on a number of variables and you should take advice.

And, finally…

Keep looking at the budget’s performance to see how effective you are being. This is a medium to long-term activity which repays your time and input in the end.

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