How much should NHS staff be paid?

In 2024, the Labour government accepted the pay review bodies’ recommendation for a consolidated 5.5% increase for Agenda for Change staff groups and 6% for doctors. Resident (née junior) doctors got an additional payment of £1,000.

The government also agreed to the NHS review body’s recommendation to add further pay points at band 8a and above. Members of most unions voted to accept the award, but Royal College of Nursing members in England voted to reject it. 

The 2024 pay award came after a decade in which NHS pay failed to keep pace with inflation. The latest data on NHS earnings show that while earnings across the NHS recovered some ground in 2024, average (mean) earnings are still significantly lower in real terms than in 2010 (Figure 2). Specifically, 9 to 11% lower for doctors, 9% lower for allied health professionals and 8% lower for nurses.

While the years since 2010 have been a period of low earnings growth across the economy, NHS staff earnings have fared worse than the earnings of people in the private sector and, in most cases, the public sector as a whole.

The IFS, in its analysis of public sector pay pressures, noted that ‘higher-paid public sector workers have seen larger falls in their real-terms pay than less well-paid public sector workers’.

This is in part the effect of the relative increases in the minimum wage, policy decisions to direct pay awards – in times of austerity and cost-of-living pressures – to those on lower incomes. This decline in real earnings is a strong feature of the health unions’ campaigns on pay, which focus on pay restitution.

Classic economic theory would suggest that dissatisfaction with pay would have an impact on recruitment and retention. But the data show a much more nuanced picture (Figure 3). Over the past 5 years (2019 to 2024), the number of full-time equivalent clinical staff in the NHS increased by a fifth from 597,632 to 736,140.

The number of full-time equivalent consultants has increased by 18%, and nurses and health visitors by 24%. The rate of growth for clinical and support staff has increased at a faster rate than in the preceding decade.

Part of the explanation may lie in the large number of staff recruited internationally through this period. NHS England reports that more than 90% of the nurses recruited to meet the previous government’s target of 50,000 extra nurses were recruited from abroad.

Comparisons of pay over time are important. However, job and career choices are likely to be more influenced by relative earnings – how pay compares to the rates for other jobs. In the three decades leading up to the financial crisis, doctors’ earnings per person were consistently at around the 95th percentile – meaning that doctors were in the top 5% of earners across the labour market.

But IFS analysis suggests that since 2017 they have fallen to around the 90th percentile. The Department of Health and Social Care’s evidence to this year’s pay review body explores doctors’ relative earnings in more detail, finding that consultant earnings over the past 5 years have been stable at the 98th percentile.

However, foundation year one and two doctors have seen their position in the earnings distribution fall from the 70th and 79th percentiles in 2018 to the 64th and 75th percentiles in 2023. Pay erosion was at the heart of the resident doctors’ recent industrial action.

For nurses, the position is somewhat different – their place in the earnings distribution for the labour market as a whole has risen since 1980, peaking around the 73rd percentile in 2010, and now hovers around the 70th percentile.

NHS clinical roles are predominately graduate professions. The government is trying to expand the numbers in training, and there is some concern that applications may be trailing off.

The Department for Education has data tracking the earnings and employment rates of different graduates over the long term. The latest data are for 2024, and we can look at employment and earnings for graduates 1, 3 and 5 years after they finish their studies.

Figure 4 shows that despite the decline in real earnings, most NHS professions have comparatively high earnings and employment at the very start of people’s careers.

1 year after graduating, doctors, nurses and allied health professionals’ earnings are above the overall average for all graduates, higher than the average for those who study science, technology, engineering and mathematics (STEM) subjects, and higher than the average for business, economics and law graduates (the other high-earnings degree subjects).

5 years out from graduation, a somewhat different picture emerges. Medicine graduates retain their earnings advantage, but nurses have a much lower rate of career earnings progression than other health professionals, as well as other STEM and business, economics and law graduates.

In making career choices, rates of employment as well as earnings are important factors (Figure 5). Nursing and allied health graduates both have very high rates of employment 1, 3 and 5 years after graduating compared to other graduates. For medicine, employment rates are lower – in part, this may reflect the trend for medicine graduates to take time out after the foundation years.

The NHS needs a sufficient, stable and experienced workforce if it is to deliver productive high-quality care.

The different data comparing NHS pay suggest that determining whether pay rates are too high, too low or just right is complex. With limited budgets, there will be difficult trade-offs between allocating resources for across-the-board increases and investment in some of the longer term challenges with the NHS pay system, such as nursing pay progression.

The pay review body process has been much criticised over recent years, largely because of delays in awards and the perception that funding constraints have undermined its independence. But without an independent body weighing the complexity of the issues, it is hard to see how to navigate the challenge of pay setting in a period of long-term fiscal constraint. For an independent pay review process to work, governments need to adhere to their recommendations.

However, most research suggests that pay is not the only, or even the main, factor influencing recruitment and retention. Within the current system, pay is somewhat disconnected from wider workforce policy. With the update to the NHS workforce strategy due to be undertaken later this year, there is a clear need for that strategy to have more focus on the long-term direction of pay policy.