Pay setting for doctors and nurses: what can the NHS learn from other countries?

Industrial action in the NHS in England has been a common feature over the last couple of years, with nurses, consultants and junior doctors all striking over pay and working conditions. In April this year, the consultants ended their dispute after union members accepted a new pay offer, while nurses remain in dispute over the 2022/23 and 2023/24 pay offers after they were rejected by members. The situation regarding junior doctors is also far from certain, with mandates for further strike action. 

With the announcement this week of an upcoming general election, it’s clear that whoever forms the next government will inherit an NHS workforce that has been far from content. At the heart of the disputes are arguments for increasing pay, in some cases restoring pay following several years of real-terms pay cuts for staff across the NHS in the wake of austerity and pay freezes in the public sector. This is happening against a backdrop of burnout, a cost-of-living crisis and long-standing challenges with recruitment and retention. While pay is not the only issue affecting NHS workers, its importance in relation to job satisfaction and retention cannot be underestimated. These challenges are not unique to the UK, nor is industrial action by health care staff. In 2022, the International Council of Nurses referred to an “alarming rise” in the number of nurses taking action in response to significant pressures and people leaving the profession.

Concerns have also been raised about the process by which wages are set for NHS staff, with confidence and trust in the system rapidly disappearing. Unions such as the Royal College of Nursing have questioned the independence of the pay review bodies and argued that members are disillusioned with the process and body itself. A previous Nuffield Trust long read outlined 11 recommendations for improving this, focusing on the pay review process and how it can support principles of affordability, transparency and fairness.

So how does the pay-setting process work elsewhere? This long read looks at a sample of other countries to explore their approach to wage setting for health care workers – New Zealand, Australia, Canada, Finland, Norway and Denmark (see the note on approach at the end for further detail). Although we acknowledge there are issues for workers across the health and social care sectors, this piece focuses on how wages are set for hospital doctors and nurses employed in the public sector.

While there does not seem to be a perfect approach, several features in other countries could provide helpful learning for the NHS. These include flexibility around the frequency of agreements, the role of mediation or arbitration in resolving disputes, and how non-pay factors are considered. Importantly, in the countries studied, agreements are mostly a result of direct negotiations between the employer and employee representative organisations. In among repeated calls for reform, learning from other countries can provide helpful insight.

How do other countries approach wage setting for health care staff?

The tool below summarises the approach in England and the countries we looked at, drawing on the document review and conversations with stakeholders.

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How different countries approach wage setting for doctors and nurses

Chart

• 24/05/2024

England Australia New Zealand Canada Finland Denmark Norway

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England

What level?

National although some pay differences locally e.g. recruitment and retention premia and high-cost area supplements 

How are wages set and who is involved?

• Pay review bodies (DDRB and NHSPRB) make recommendations to government based on evidence submitted to them 

• Organisations e.g. Royal College of Nursing, British Medical Association, DHSC, NHS England and NHS Employers submit evidence to the pay review bodies

• Agenda for Change contract covers staff such as nurses, midwives and Allied Health Professionals 

• Consultants and junior doctors covered by separate contracts 

How long do agreements last?

Pay recommendations are made annually

What happens if an agreement cannot be reached?

Recommendations accepted by the government are applied while parties either renegotiate or take industrial action until a dispute is resolved

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Australia

What level?

Mostly at state level other than Victoria, Northern Territory and Australian Capitol Territory which are covered by federal law

How are wages set and who is involved?

Enterprise bargaining between employer/ their representative organisations and unions – this is a type of collective bargaining whereby agreements are negotiated at the level of individual organisations rather than across sectors as a whole

How long do agreements last?

Varies by state – mostly every three years although can be up to four

What happens if an agreement cannot be reached?

• Majority of states provide for access to arbitration

• For example, in Queensland, the Industrial Relations Act (2016) sets out the process whereby parties can access conciliation/ arbitration with the Queensland Industrial Relations Commission

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New Zealand

What level?

Largely centralised for state-employed health care workers although some agreements at a more localised level

How are wages set and who is involved?

Negotiations between Te Whatu Ora (Health New Zealand) state funded employer and unions (e.g. New Zealand Nurses Organisation) to create collective agreements

How long do agreements last?

Maximum three years, although ranges from one to three years

What happens if an agreement cannot be reached?

Mediation

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Canada

What level?

Province level

How are wages set and who is involved?

• Specific approach and organisations involved varies by province

• Physicians are mostly paid through a ‘fee for service’ model, although there are some examples of alternative payment approaches

• State medical associations and nursing unions negotiate directly with employer organisations (e.g. provincial government or hospital associations)

How long do agreements last?

• Varies by province but largely three or four years

• Parties can agree to shorter timeframes to account of context

What happens if an agreement cannot be reached?

• Varies by province

• Some provinces have laws in place outlining options for mediation and binding arbitration

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Finland

What level?

Multiple depending on employer (e.g. state or municipalities)

How are wages set and who is involved?

Negotiation of collective agreements between Tehy and relevant employers (municipalities, state and private sector)

How long do agreements last?

Current agreement (covering staff such as nurses) is three years

What happens if an agreement cannot be reached?

• Compulsory for parties to participate in mediation through negotiations

• Finland has a system of compulsory conciliation, but the settlement of labour disputes is not compulsory

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Denmark

What level?

• Multiple depending on employer (state, municipalities and regions)

• Some regional/ profession specific agreements

• Limited involvement of the state in negotiations other than exceptional cases (see discussion of nurses below)

How are wages set and who is involved?

• Negotiation of collective agreements between workers organisations e.g. Danish Medical Associations and Danish Nurses’ Organisation and employer organisations

• Agreements vary by profession and employer

How long do agreements last?

Mostly every three years although some examples of shorter agreements

What happens if an agreement cannot be reached?

Established procedure for conflict resolution which can lead to arbitration, or intervention from the Labour Court

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Norway

What level?

Largely centralised

How are wages set and who is involved?

• Spekter (representative of hospitals) negotiates with employee organisations (e.g. Norwegian Medical Association/ Norwegian Nurse Association)

• Whether agreement goes to a vote or not depends on approach of union

How long do agreements last?

Overall agreements are negotiated every two years but pay is bargained every year

What happens if an agreement cannot be reached?

• Mediation is part of the negotiating process but if no agreement can call a dispute

• Parties must take part in arbitration – Independent Board exists to decide result

Who is involved in negotiating agreements and at what level do they take place?

In the countries studied, wage setting is done through negotiating agreements, which set out pay, entitlements and working conditions. Negotiations largely take place directly between the relevant employee organisations (associations and unions) and employer organisations (or their representatives). For many countries, this is reflective of the wider approach to collective bargaining across other sectors. In England, pay review bodies (for public sector workers) make recommendations to the government based on evidence submitted to them by relevant organisations.

This means that the approach to pay setting for other public sector workers can also be relevant, and the approach to health care staff in most of the countries studied largely reflects the wider approach to industrial relations and bargaining. The extent to which health care workers use a different system could be largely down to country context, with countries such as Denmark having a strong tradition of collective bargaining across all sectors.

This also means that, in the countries studied, the role of the national (or federal) government is different, with most negotiations taking place directly between the unions and employers or their representatives. This has been a key point of contention within the NHS, with unions criticising the pay review bodies as not being independent from government.

Of course, in some cases this reflects the generally more limited role of the federal government in health care, but also in industrial relations more generally. In Denmark, parliament and government generally provide minimal intervention in labour relations. After nursing union members rejected a pay offer in 2021 that had been accepted by the leadership, the government intervened, giving Danish nurses a 5% salary increase over three years. This was considered unusual.

As with the NHS, agreements in the other countries we looked at vary by staff group, and can also vary by setting, with doctors and nurses covered by separate unions, agreements and negotiations. For example, in New Zealand and some Canadian provinces, nurses working in hospitals are covered by different agreements from those working in long-term care settings. This can lead to competition between settings for staff who are attracted by more generous pay and working conditions elsewhere. For all public sector workers in Norway, the percentage wage increase is largely similar for all professional groups.

In the NHS, core wages are set at a national level. But other countries adopt a more regional approach – reflecting the way that health care is organised and delivered, and who the main employer is. In Canada, negotiations happen within provinces, and in Australia at state level (with some exceptions). Most states or provinces therefore have different approaches and agreements. In both New Zealand and Norway, the approach is more centralised, at least for state-employed health workers. In New Zealand, for example, there are agreements between the relevant unions and Health New Zealand (Te Whatu Ora), with others for staff employed by private and community providers.

How long do agreements last?

How long agreements last also vary, including in between regions in countries that adopt this approach. In the countries studied, negotiations ranged from taking place annually to every four years, with some countries having limits on the length of agreements set out in law. But several countries allow for parties to agree to shorter agreements that consider the particular local context (such as the impact of the Covid-19 pandemic), or to ensure that negotiations are contemporary, reflecting inflation or election cycles, for example.

In England, there has been criticism of the timing of pay deals, with pay review bodies recently making their recommendations after the point in which new pay deals were supposed to come into effect, with pay backdated for the period. This leaves parties with considerable uncertainty. It has been suggested that longer-term pay offers have advantages, although there would need to be a process to revisit the deal if economic or service conditions fell outside set parameters. It is interesting to note that this does appear to be accounted for in other countries.

The question of timing is an interesting one, and there are pros and cons to longer timeframes. More regular pay setting allows for parties to consider the most current figures around inflation, for example, but on the downside it means there is a limited amount of time for terms to exist before negotiations begin again (particularly when processes are lengthy). Furthermore, if annual deals come into effect late, this could leave workers with significant uncertainty and questions about how deals work retrospectively. Longer agreements on the other hand arguably provide for greater stability (particularly in cases where industrial action cannot take place for the duration of the agreements) and, particularly on non-pay elements, allow work to be done to embed those principles in everyday work.

What happens if an agreement can’t be reached?

In all the countries studied, mechanisms exist to attempt to resolve the situation if an agreement cannot be reached. This commonly involves mediation, or arbitration between parties, and at times the involvement of independent bodies. In Ontario in Canada, there is a binding arbitration framework requiring mediation then arbitration in the case of disputes – the result of which is binding on parties. In the summer of 2023, the Ontario Nurses’ Association and Ontario Hospital Association were involved in arbitration to resolve a dispute.

In Norway, mediation is part of the negotiating process, and parties cannot take industrial action without mediation. If there remains no agreement and parties do not choose to continue negotiations, an independent board will step in. Likewise in Finland, the National Conciliator exists to provide mediation between parties across all workforce groups, and processes are in place to try and resolve disputes once a party has notified that they plan to take strike action. Forums also exist to support ongoing discussion. In New Zealand, the National Bipartite Action Group (NBAG) brings health sector unions together with Te Whatu Ora (Health New Zealand) on a monthly basis to identify and resolve issues.

More generally, there are rules and expectations around how parties conduct themselves in relation to bargaining, sometimes set out in legislation, such as how regularly people should meet, the need for open communication, as well as a culture around engaging constructively in negotiations. In Denmark, the parties have a responsibility to make “the labour market run smoothly”, and – as described above – elsewhere parties are required to engage in mediation and mandatory arbitration as part of conflict resolution. Although undoubtedly strategy plays a key role, there also appears to be an element of good faith required.

Industrial action is also an option and can be a strategy in negotiations. Strikes by health care workers have taken place in several countries in recent years. However, the rules around when this can take place – and the process that must occur – varies. In both Canada and Australia, industrial action cannot take place in the duration of agreements, but only once they have expired and the parties are negotiating new terms. Countries also have different approaches to organising strike action. In Norway, for example, once a strike is called then health care workers cannot return to work until it is called off.

Which issues are negotiated and what matters most?

Agreements in the countries studied include provisions not only on pay, but other working conditions too. In their submission to arbitration, the Ontario Nurses’ Association argued for improved policies on workload, holidays and work-life balance, as well as improved pay. In the most recent negotiations for junior doctors in Denmark, members called for improvements on working conditions and flexibility as well as pay restoration. Following this, the most recent agreement for doctors working in the regions provides for changes in pensions, as well as maternity and parental pay alongside a salary increase. 

This is not surprising. A recent systematic review focused on the English NHS found that while pay was related to clinicians’ job satisfaction (which in turn affects retention), it was one of many factors and was on its own unlikely to address concerns that NHS staff have about working conditions. More generally, work-life balance is now (alongside retirement) the most common reason for NHS staff to leave their role, and this is an issue that appears to be featuring strongly in other countries too.

This is reflective of the changing profile of the workforce, and expectations of what people want from work. This can also be seen in the most recent deal offered to consultant doctors in England, which contained enhanced arrangements around shared parental leave alongside increases in pay. In their most recent evidence to the pay review body, NHS Employers stated that improving staff experience will be important to improve retention and to achieve the ambitions of the NHS Long Term Workforce Plan, as well as flexibility in pensions.

In other countries, it appears there is also scope to consider broader policy issues within negotiations, such as how to address workforce shortages. In the Canadian province of British Columbia, minimum nurse-to-patient ratios were a priority in negotiations and a funding settlement was agreed to implement this, alongside the broader agreement.

Where industrial action has occurred, it is interesting to note that increasing pay has not been the only issue. In late 2022, community and primary health care nurses in New Zealand went on strike arguing for pay parity with hospital nurses, noting the impact this was having on recruiting and retaining nurses outside of hospitals. In 2023, nurses also took action to draw attention to the importance of safe staffing levels.

What can the NHS learn from this?

There are choices in how we set pay for doctors and nurses and there is a clear precedent from overseas for a different way of doing things. Ensuring that all sides are bought in to the process is a minimum that we should expect if the situation is to change. Unfortunately, we appear far from that at the moment.

The current situation is wholly unsatisfactory, with people disillusioned and distrustful of the existing process – a sorry state of affairs not only for staff, but for patients too. There is still significant uncertainty about the pay offers for the previous financial year as we enter the next one, as well as frustration from staff groups about the lack of consistency in approach and outcomes. With the financial strain on the NHS and individuals not letting up, and possible further industrial action from junior doctors, something needs to change if we are to see any improvement.

But it is interesting to look at how other countries approach this issue to see what can be learned, and there are some features of other countries that are compelling. Consistency between staff groups looks to be fairer and can provide greater certainty, while good faith appears to be a key ingredient in ensuring that parties are bought into the process. Longer timeframes appear to help with enabling stability while maintaining flexibility to account for contemporary challenges or changes in circumstances. 

Of course, it’s neither possible nor desirable to directly apply what happens elsewhere to our context. This is a complex area, and the approach to wage setting for health care workers internationally depends on the particular country context, including labour laws, the role of trade unions, and wider cultural and societal approaches to pay equality and bargaining. Further research is required to understand the implications of these different approaches, and how they might play out here. It remains to be seen what impact any proposed reforms to the review body will have on confidence in the process, but it is positive to see recognition of some of the shortcomings.

The workforce crisis is a global problem. Workload and burnout, exacerbated by the pandemic, have contributed to a perfect storm of challenges which will not be easy to tackle, and the workforce of the future is likely to have different priorities for their working lives. Reform of pay and the process alone is unlikely to be sufficient to tackle the systemic issues the health care workforce is experiencing worldwide. That said, there are clear moral and practical reasons to get this right. In this uncertain environment, confidence in the process will be vital for staff now and in the future.