As the landscape of healthcare in UK undergoes continual transformation, the recent elevation of the national living and minimum wage in 2024/25 marks another pivotal moment. This substantial increase is impacting everyone in the economy, notably the General Practitioner (GP) surgeries nationwide. In this article, we will delve into the profound effects of this wage hike on GP practices and the various challenges and opportunities that arise amidst these shifts in economic circumstances.
The new national living and minimum wage in 2024/25
The Government has announced the new National Minimum Wage rates starting April 2024. It will increase to £ 11.44 per hour from £ 10.42 in 2023, an approximately staggering 10% increase. In addition to this, those aged 21 and 22 will also now be eligible to receive such rate, ultimately widening the scope of the new and higher national minimum wage.
New National Minimum Wage rates starting 1 April 2024
| 21 and over | 18 to 20 | Under 18 | Apprentice | |
| April 2024 to March 2025 (new rates) | £ 11.44 | £ 8.60 | £ 6.40 | £ 6.40 |
Current rates for the tax year ending 31 March 2024.
| 23 and over | 21 and 22 | 18 to 20 | Under 18 | Apprentice | |
| April 2023 to March 2024 | £ 10.42 | £ 10.18 | £ 7.49 | £ 5.28 | £ 5.28 |
According to the Low Pay Commission (LPC), this will be the largest ever increase in the minimum wage in cash terms and the first time it has increased by more than £1. The size of this increase is driven by the strength of pay growth across the economy, which is forecast to continue into next year.
Alongside the National Living Wage, LPC has recommended large increases to National Minimum Wage rates for workers aged 20 and under, and apprentices. LPC believes that these increases reflect the strength of the youth labour market and aim to prevent the wage floor for young people being cut adrift from prevailing wage rates in the wider labour market.
What does the increase mean to you as a GP practice?
From budgetary constraints to potential opportunities, the financial landscape for GP surgeries is undergoing continuous transformation, requiring you to find strategic approach to maintain fiscal balance.
Impact on Operational Expenditure
With the national minimum wage increasing by roughly 10% or £ 1.02 per hour, the overall expenses of GP surgeries will equally rise – higher salaries for minimum wage staff members, employer national insurance contributions, and employer pension contributions.
For a full-time staff member working 37.5 hours a week, a GP surgery will have to pay £ 1,995 more in salaries, £ 275 in employer national insurance, and £ 287 in employer pension contributions. This translates to an extra expenditure of at least £2,500 per year — a sum not to be taken lightly.
As GP practices greatly rely on their workforce to run and operate efficiently, salaries and wages of staff alone occupies at least 40% to 80% of the total expenditures of a practice.
Sample pie chart of 1-month administrative expenses of a GP practice
Furthermore, the wage hike can create pressure to adjust higher salary tiers to maintain differentials. This “wage compression” may lead to dissatisfaction among higher-paid staff. While adjusting salary structures is necessary for internal equity, it poses financial challenges and requires strategic balancing. External factors, like industry standards, also influence these decisions, impacting GP surgeries’ competitiveness in attracting top talent. Navigating these challenges demands a careful analysis of the existing wage structure, transparent communication with staff, and a strategic approach to maintain financial sustainability.
This increase in your staff costs, along with increasing other operating costs such as energy bills and maintenance costs, it is vital that you have plans on how to mitigate and defend against these challenges.
Recruitment and Retention Expenditures
As the minimum wage undergoes an upward shift, creating a positive work atmosphere becomes not only an aspiration but a necessity for GP surgeries. The challenge arises in securing and retaining qualified healthcare professionals in the face of heightened wage expectations. This necessitates a strategic allocation of financial resources to cover various aspects of recruitment, training, and staff retention.
Recruitment costs – Financial resources need to be dedicated to effectively advertise job opportunities, promoting the positive aspects of working at the surgery, and reaching potential candidates through various channels.
Training Expenditures – Establishing comprehensive onboarding programs is essential for integrating new staff seamlessly into the workflow. This includes training sessions, orientation materials, and mentorship programs, all of which require financial investments.
It Is also essential to provide ongoing training and professional development opportunities to retain a skilled and adaptable workforce.
Retention Strategies – Offering competitive salaries is a fundamental aspect of staff retention. In addition to financial compensation, attractive benefit packages, such as healthcare plans, retirement contributions, and other perks, play a pivotal role in retaining valuable employees.
GP surgeries might also take an interest in initiatives that promote a healthy work-life balance, such as flexible scheduling, remote work options, and employee wellness programs, contributes to job satisfaction and better attendance at work.
Lastly, acknowledging and rewarding exceptional performance fosters a positive work culture. Budgeting for employee recognition programs, bonuses, and other incentives can significantly impact staff morale and commitment.
The financial commitment to recruitment and retention strategies extends beyond the basic salary considerations. It encompasses a comprehensive approach to creating an environment where healthcare professionals feel valued and motivated in their roles. By doing so, GP surgeries can avoid incurring more expenses to cover high employee turnover, on top of the incoming wage hike.
Technological Investments
To cope with rising costs, GP surgeries may take advantage of new technology to streamline processes and enhance efficiency. These could help in maintaining high-quality patient care while managing increased wage expenditures.
Electronic Health Records (EHR): Implementing EHR systems facilitates efficient management of patient data, reducing paperwork and workload of staff members. Additionally, accessible and organized health records contribute to more informed and timely decision-making, ultimately leading to enhanced patient care. This can result in improved patient satisfaction, which are crucial benchmarks for the success of any healthcare practice.
Telemedicine Solutions: This allows remote consultations, expanding access to healthcare services beyond the physical confines of the GP surgery. This not only caters to the evolving preferences of patients but also potentially reduces the need for additional staff in certain areas, mitigating the impact of increased wages on staffing costs. It can also lead to optimized appointment schedules, reduced wait times, and efficient use of resources.
Digital Administrative Tools: Investing in such tools for administrative tasks, such as appointment scheduling, billing, and claims processing, can significantly reduce the workload on administrative staff. Automation not only minimizes errors but also frees up valuable time for staff to focus on more complex and patient-centric tasks.
These technological enhancements not only enhance operational efficiency and elevate patient care but also represent a strategic investment in the sustainability and adaptability of GP surgeries. Despite the initial investment required, GP surgeries can anticipate long-term benefits through cost savings achieved by reducing administrative staffing hours, thereby offsetting the impact of the increased national minimum wage.
Handling the effects of the new national minimum wage is challenging in itself. As such, Practice Managers could use a helping hand by having a reliable and experienced payroll and pensions provider.
City Heights Accounting Services specialises in tailored support for GP surgery finances. With experience in serving over 55 GP practices, their expertise spans payroll and pensions, PCSE administration, bookkeeping, business advisory, and more.
To find out more – schedule a complimentary initial consultation with an expert advisor today!