Who this guidance is for

The Department for Health and Social Care (DHSC) has announced that eligible employers can apply for funding to support them in making non-consolidated payments relating to the Agenda for Change pay deal to their eligible staff. This follows the pay award already announced and formally confirmed by the Secretary of State for Health and Social Care on 3 May 2023.

Guidance first published by NHS Employers in March 2023 makes clear who is eligible to receive the non-consolidated payments. It states that the award is restricted to staff directly employed (for example, permanent and fixed term contracts) by organisations listed in annex one of the Handbook on Agenda for Change terms on 31 March 2023. Based on that guidance and funding received from DHSC, NHS England made direct payments in June 2023 to NHS organisations to fund the awards.

The organisations listed in annex one can be found here: NHS Terms and Conditions of Service Handbook | NHS Employers. Those employers are not directly eligible for the funding that DHSC are making available, and which is described in this guidance. Requests may still be made relating to staff employed in relation to other legal entities.

DHSC has determined that organisations not listed in annex one but providing NHS or public health grant services under qualifying contractual arrangements (described from here onwards as relevant organisations) are now able to request funding. This will be to support them in making non-consolidated payments to their staff employed on Agenda for Change terms and conditions, and where they can demonstrate the payments cause a negative financial impact on the delivery of key services and viability to continue without additional funding.

NHS England has been requested to manage this exceptional scheme on behalf of DHSC. It will collect and validate requests for funding in line with the guidance, and the decision on approving these requests will be made by DHSC.

Process for requesting funding

Funding will be provided in most cases by direct payments from NHS England (on behalf of DHSC) or by DHSC directly to relevant organisations on a one-off basis. This will be for the specific purpose of supporting those employers in making non-consolidated pay awards to their staff that are entitled to the payment.

The arrangements for payments will be confirmed with relevant organisations directly. It will include a condition requiring the information provided as part of the request to be correct and that funds are used to support pay awards being made to staff.

Relevant organisations are expected to carefully review the criteria set by DHSC and described in this guidance before submitting a request in the form provided. This form must be approved by the chief financial officer or equivalent responsible finance executive. Supporting evidence is required to be provided as part of the submission.

NHS England is managing the collection of submissions on behalf of DHSC. Requests are required to be sent to england.ncpayments@nhs.net and must be sent no later than 15 December 2023. Requests received after this date will not be considered.

Submissions will undergo validation by NHS England, during which additional information may be requested directly. A final decision on the approval or not of the requests will be made by DHSC and these outcomes will be confirmed to organisations in writing by NHS England (on behalf of DHSC).

Relevant organisations with a successful request will have the value of their payments confirmed and the basis on which this was calculated, following which they will be entitled to request a review of the amount described, provided this request is made within seven days of being notified. Any review will be undertaken by DHSC for the purpose of determining if the payment has been correctly calculated in accordance with this guidance.

Unsuccessful requests will be confirmed with organisations directly and the basis on which the request has not been approved by DHSC. Organisations will be entitled to seek a review of the decision, providing this request is made within seven days of being notified. Any review will be undertaken by DHSC for the purpose of determining if the decision has been reached correctly in accordance with this guidance.

No review will progress unless it is clear this guidance has been wrongly applied. NHS England may request additional information from relevant organisations for the purposes of a review by DHSC. Additional evidence on eligibility or the amount of any payment will not be considered unless requested by NHS England.

Criteria for funding

Relevant organisations must ensure that their request for funding meets the criteria set by DHSC and described below, and that it is accompanied by the required supporting information. Failure to comply with these conditions will result in requests being rejected.

The criteria for funding includes the following three conditions, which are described in more detail below:

1. Organisations must deliver health services commissioned for the purposes of the health service in England by integrated care boards (ICBs), NHS England, NHS trusts or foundation trusts (FTs) or receive funding through the public health grant (described from here onwards as relevant contracts).
2. Organisations must employ eligible staff with a direct and dynamic link to the Agenda for Change terms and conditions (described from here onwards as relevant staff).
3. Organisations must demonstrate a negative financial impact from the non-consolidated pay award presenting a risk to the continuity of services (described from here onwards as relevant circumstances).

Relevant contracts

Funding is available to support the delivery of services as part of a relevant contract. These are health services commissioned by ICBs, NHS England, NHS trusts or FTs (or on their behalf by a local authority acting under section 75 partnership arrangements), or public health services commissioned by a local authority (services covered by the public health grant).

Local authorities are also eligible to request funding relating to the staff they employ, and which are funded through the public health grant. Local authorities should not request funding for staff employed in the organisations they commission, and this can only be requested by those employers directly.

Submissions are required to provide details on the relevant contracts held in 2022/23 (April 2022 to March 2023), including contact details of each commissioner, the total contract value and the types of services delivered. These commissioners will be contacted as part of the validation process and be requested to confirm whether any funding has already been provided for the non-consolidated pay award. This will be used for any setting-off adjustments and any funding set off from payments will be returned to the commissioner.

Relevant staff

Funding is available to support non-consolidated pay awards being made to relevant staff, who are entitled to receive payments and working to deliver relevant contracts. These are staff directly employed on permanent or fixed term contracts with a direct link to Agenda for Change. This means the terms and conditions of those employment contracts should mirror those set out in the current NHS Terms and Conditions of Service Handbook, as amended from time to time, and continue to be updated in line with any changes.

The current version of the NHS Terms and Conditions of Service Handbook can be viewed here: NHS Terms and Conditions of Service Handbook | NHS Employers

The terms and conditions should automatically apply to existing and new staff for the roles supporting the delivery of the relevant contracts. It is also required that all staff working on relevant contracts are employed on Agenda for Change conditions, although staff across the wider organisation (working on other services) may be on different contracts.

Employment contracts, whether standard or in multiple versions (i.e. different for different bands or roles), are requested to be shared and must be those that were in place as of 31 March 2023. The contracts should be accompanied by a cover note (within a 500-word limit) setting out the main clauses demonstrating that they mirror Agenda for Change terms and conditions. Contracts submitted will be checked against the Agenda for Change terms and conditions as part of the validation. All information provided for this purpose will be treated as commercial in confidence and personal data will be handled in accordance with data protection requirements.

Submissions are also required to provide full-time equivalent (FTE) details on eligible staff employed working on relevant contracts in each Agenda for Change pay band and spine point as of 31 March 2023. This information will also need to include an estimate of the percentage of those staff’s time spent on relevant contracts. The information provided (once validated) will be used to set payments. Data held centrally, for example on the Electronic Staff Record (ESR), will be used where available as part of the validation process.

Relevant circumstances

Funding is available to support non-consolidated pay awards in organisations in relevant circumstances. DHSC is seeking to only intervene to the extent that organisations are considered unable to cover the costs of the pay award without it negatively impacting on the continuity of services.

To meet this criteria, these circumstances should be demonstrated in reference to the risk assessment framework and reporting manual for independent sector providers of NHS services (IPRAF). Specifically, the IPRAF includes a metric for liquidity ratios (in days), as part of the financial continuity of service risk rating. This takes working capital and divides it by annual operating expenses, then multiplies by 360 (for a full year) or 180 (for half a year).

This metric will be used to determine whether an organisation is eligible in that it meets the relevant circumstances in the first instance. Organisations providing data to show a rating of 1 or 2 (i.e. fewer than 10 days of liquidity available to cover operating costs) in the year the pay award is (or would be) accounted for will be deemed to have met this condition. This means either the full year 2022/23 (April 2022 to March 2023) or the first half of 2023/24 (April 2023 to September 2023). It should be stated where the payments have already been made (including when they were made), and so are already in the financial position reported, or where they have not been made so the potential cost can be factored against the current financial year.

It is recognised that this data may be unaudited, and all information provided for this purpose will be treated as commercial in confidence. Data should be provided on a consolidated group basis, if applicable, or with current inter-company balances identified for adjustments where consolidated figures are not available.

Submissions will be assessed against the three conditions set out above and DHSC will approve requests as part of a first tranche of the funding available. DHSC will then review the scheme considering this funding and organisations not meeting the criteria above (specifically the relevant circumstances) will then be considered for a second tranche of funding, as described below.

Tranche 2 funding

DHSC will consider a second tranche of funding based on the same criteria relating to relevant contracts and relevant staff, as described above. A statement provided (within a 500-word limit) with the approval of the Chief Financial Officer (or equivalent responsible finance executive) will be used to determine whether the metric on liquidity ratios should be expanded beyond 10 days. This should be submitted as a separate document.

This statement should provide further evidence on why the organisation is unable to cover the costs of the pay award without it impacting on the continuity of the services they provide. This evidence will be used by DHSC to consider whether to provide a second tranche of funding, if organisations are able to sufficiently demonstrate the criteria should be expanded given their circumstances.

The statement does not need to set out all the evidence to support these circumstances but should identify where this is available and can be provided upon request. This may include, but does not need to be limited to, references to the following:

• Reasonable adjustments to working capital balance, for example to include assets held for sale, deferred tax balances, inter-company balances if non-consolidated figures are provided
• An in-year loss-making position, which could be further evidenced by the operating margin metric also included in the IPRAF
• Committed capital expenditure or other investments in 2023/24 or 2024/25
• Planned essential (but non-committed) capital expenditure in 2023/24 or 2024/25, which could be further evidenced by the useful economic life of assets, key systems (such as patient records) reaching the end of support and changes in regulatory landscape (e.g. National Information Systems)
• Planned restructuring, for example back office or operating model restructures in 2023/24 or 2024/25
• Expected loss of contribution from losing key contracts in 2023/24 or 2024/25, which is not mitigated by planned restructuring, i.e. the impact of stranded costs
• Agreements to support system cost pressures in 2023/24 and 2024/25
• Other unfunded costs pressures not already stated
• Impact on the provider’s internal reserves policy, including maintaining a solvent wind-up reserve.

Further guidance on the tranche 2 funding will be published by DHSC, or on its behalf by NHS England. This will not require a separate submission and organisations should apply now to be considered.

How funding will be calculated

Relevant organisations who make a request for funding and meet the criteria set out will have the details of their payment confirmed. It will also be confirmed how they will receive funding, which in most cases will be through direct payments from DHSC or NHS England (on behalf of DHSC).

Payments will be calculated using the FTE data provided in the submission, which should relate to staff employed on 31 March 2023. These FTEs should only be those working to deliver health services commissioned for the purposes of the health service in England (in line with condition 1) and those employed on Agenda for Change terms and conditions (in line with condition 2). This data will be verified against data held in ESR, where applicable.

The standard calculation will take this FTE data by spine point on 31 March 2023 and multiply it against the payment values in the table below. These values include additional employer national insurance costs at 13.8% and the impact of the apprenticeship levy at 0.5%. No adjustments are made for pension contributions as the non-consolidated pay awards are non-pensionable.

Cost of non-consolidated pay awards per FTE staff (including on-costs)

Any payments already made to relevant organisations for the non-consolidated pay award will be confirmed with commissioners of relevant contracts, as part of validating submissions. This funding will be set off against the payments calculated.

Tranche 2: update 20/03/2024

As set out above, following submissions made by organisations to expand the financial criteria, as requested in the statements for tranche 2 – DHSC have decided to expand the relevant circumstances criteria on this exceptional occasion.

This is a result of the financial cases made by organisations of the additional factors impacting the ability to make the payment beyond liquidity, on this occasion it particularly demonstrated the timing of this pay pressure falling just after the end of the 2022/23 financial year meaning following review of financial circumstances the financial data is either nearly a year behind or relying on internal accounts reducing audited consistency. This will therefore not impact the eligibility of any provider under the “relevant circumstances” criteria on this occasion.

DHSC retain the ability in any future schemes to enforce such a criteria around financial circumstances of organisation where it decides it suitable, as it is for independent providers to determine employee terms and conditions.

Publication reference: PRN00923i