The potential post-tax pay rise for NHS workers
08 August 2023
On 14 July, the government announced that it will accept the recommendations from the various public sector pay review bodies. It was hoped that this would bring an end to the myriad of pay disputes throughout the public sector, and crucially bring an end to the disruptive strike action that is crippling some public services.
Meanwhile, the offer made to nurses was not universally accepted as the Royal College of Nursing (RCN) voted to reject the offer. The RCN subsequently failed to achieve a mandate for further strike action, meaning that most of the mainstream nurse strikes are over for now. The offer made to nursing staff was a gross pay increase of around 5%, with the RCN expressing outrage that other public sector workers have subsequently been offered a more substantial increase.
But what do these pay offers mean in real terms for NHS staff members in England, Wales and Northern Ireland? Especially if the increase pushes them over a threshold into a higher tax band. The tax rate thresholds have, following well publicised rises in the early days of the Conservative government, remained static in recent years while pay inflation soars. This has dragged thousands of workers into paying tax where they previously paid none, with the Institute of Fiscal Studies predicting earlier this year that one in eight nurses would be higher-rate taxpayers by the 2027/28 tax year.
According to the government, the average nurse is currently receiving a salary of approximately £37,000. A 5% increase to this would have the employee’s pension contribution deducted and then be subject to income tax and National Insurance contributions (NICs). We calculate that, following these deductions, the average nurse, without a student loan, may take home as little as an additional £94 per month. For those nurses with a student loan, the additional take home pay may be closer to £80 per month.
Meanwhile, the most experienced junior doctors, including speciality trainees in their 8th year of training have been offered a pay rise from £58,398 to £63,152. This is an increase of 8.1%, but all of this may now be taxed at the higher income tax rate due to the static income tax thresholds. For those without a student loan, their pay increase stands at around £180 per month after income tax, NICs and pension contributions. Those with a student loan will receive about £30 a month less due to student loan repayments. Junior doctors will therefore fare slightly better than the nurses. However, it’s also worth noting that some NHS staff may have suffered a drop in their net pay last October when NHS pension scheme contribution rates and thresholds were revised.
Average monthly increases in household bills soared far past the level of these net pay rises some time ago, and with interest rates also rising, so much so that the Office of National Statistics estimate an average increase in a monthly mortgage repayment of £481 per month on an average semi-detached property, any raises will be unlikely to offset much of the increased cost of living.
Given the ever-increasing cost of living, and the considerable deductions taken from pay rises, ongoing pay disputes could continue for a lot longer. Additionally, if inflation continues to rise, new disputes may arise very shortly after pay rises are agreed.
Meanwhile, the offer made to nurses was not universally accepted as the Royal College of Nursing (RCN) voted to reject the offer. The RCN subsequently failed to achieve a mandate for further strike action, meaning that most of the mainstream nurse strikes are over for now. The offer made to nursing staff was a gross pay increase of around 5%, with the RCN expressing outrage that other public sector workers have subsequently been offered a more substantial increase.
But what do these pay offers mean in real terms for NHS staff members in England, Wales and Northern Ireland? Especially if the increase pushes them over a threshold into a higher tax band. The tax rate thresholds have, following well publicised rises in the early days of the Conservative government, remained static in recent years while pay inflation soars. This has dragged thousands of workers into paying tax where they previously paid none, with the Institute of Fiscal Studies predicting earlier this year that one in eight nurses would be higher-rate taxpayers by the 2027/28 tax year.
According to the government, the average nurse is currently receiving a salary of approximately £37,000. A 5% increase to this would have the employee’s pension contribution deducted and then be subject to income tax and National Insurance contributions (NICs). We calculate that, following these deductions, the average nurse, without a student loan, may take home as little as an additional £94 per month. For those nurses with a student loan, the additional take home pay may be closer to £80 per month.
Meanwhile, the most experienced junior doctors, including speciality trainees in their 8th year of training have been offered a pay rise from £58,398 to £63,152. This is an increase of 8.1%, but all of this may now be taxed at the higher income tax rate due to the static income tax thresholds. For those without a student loan, their pay increase stands at around £180 per month after income tax, NICs and pension contributions. Those with a student loan will receive about £30 a month less due to student loan repayments. Junior doctors will therefore fare slightly better than the nurses. However, it’s also worth noting that some NHS staff may have suffered a drop in their net pay last October when NHS pension scheme contribution rates and thresholds were revised.
Average monthly increases in household bills soared far past the level of these net pay rises some time ago, and with interest rates also rising, so much so that the Office of National Statistics estimate an average increase in a monthly mortgage repayment of £481 per month on an average semi-detached property, any raises will be unlikely to offset much of the increased cost of living.
Given the ever-increasing cost of living, and the considerable deductions taken from pay rises, ongoing pay disputes could continue for a lot longer. Additionally, if inflation continues to rise, new disputes may arise very shortly after pay rises are agreed.
Aysha Marley
AUTHOR
Aysha Marley