Price Cap Guidance: An update 2/2

In part one of my recent blog I talked about the latest letter from Jim Mackey and the looming implementation of price cap guidance. In the ten days or so that have passed since writing part 1, I’ve had my own first hand experience of a client holding the line. I had introduced two operational managers, for three vacant roles, and had submitted both to the client at market rates. They were made initial offers but within 3 days HR at the trust had intervened and instructed the hiring manager to comply with price cap guidance and re issue the offers at price cap rates, which was 35% below the rate at which the candidates had entered the process. I initially thought we were going through the negotiation motions, the candidates unsurprisingly rejected the revised offers at the lower rate but the client… held firm. Any negotiation position I might have had to persuade them they needed to pay market rate was undermined by the fact that they offered the third post to a candidate who was happy to work at price cap guidance. I am not sure of the calibre and seniority of the third candidate (who was represented by another agency), but the attitude of the trust HR department quite rightly was to say that there were clearly candidates out there who were above the line, and at compliant rates, so the hiring manager needed to get back out there and find two more of those.

Despite this experience, I’m still not finding many candidates who are securing roles at price cap rates, nor other clients who are standing firm and complying. That said I was at a client meeting last week where the trust said they were trying to abide by price cap rates in their use of agency nurses, only to find the nurses were going to the trust up the road for market rate. The solution was to form an alliance with 3 other trusts in the region and agree at Chief Exec level not to hire agency nurses at market rates. Those agency nurses firmly in the centre of this geographical area would be left with no or limited choices, and the alliance expected that overall their average price paid per shift would start to fall. I have blogged about this before, and said that the success of price cap guidance is dependent on the NHS acting in unison and essentially giving the candidate community no choice. I am still sceptical that will happen in a coordinated way as it did in this particular region cited above, but the mandated nature of the message from April 1st will certainly help their cause.

And there still might be solutions to find good candidates roles with price cap compliant clients. I took a brief from a client last week who regraded a post from an 8b to an 8c, to allow him to use a higher hourly rate than should have technically been attributed to the role. This was an interim “Business Change Consultant” role, off structure and so not easily pegged to an afc band. Besides which, one of the features of the interim market is that clients often try to over recruit, and secure candidates experienced a band or two above the level of the requirement to make sure they have greater confidence about eliminating any learning curve and having outcomes delivered. It will be less easy to regrade an interim requirement at a higher level if it is patently gap cover of an existing role in an organisation’s structure. The most difficult for example could be an 8d Divisional Ops Director. Even then there is the potential to a retitle the Divisional Director of Medicine role into a Programme Director for Flow and fudge the banding, but some organisations may not feel comfortable about the tactic and would be nervous about NHSI scrutinising a return and discovering the ruse.

The other variable to play with is the hours. Price cap guidance uses hourly rates, whereas the interim market is accustomed to daily rates. Most trusts will multiply the hourly rate by 7.5 or 8 to give a day rate budget, but for many interims a 10 or 12 hour day is the norm and if a long hours working pattern is pre agreed with a client, or is made contractually binding, the interim will still have the chance to up their income whilst keeping the client compliant.

Finally agencies themselves might have to be more creative to facilitate compliance. By charging a one off fee, instead of a margin, an agent can remove themselves from the equation and allow the full price cap budget (ie 624 / day for an afc 9) to go to the candidate. As per my last blog, 624 is still not really matching market rates for band 9s, but its certainly closer than 525 and might bring a few extra candidates into contention against a given brief. There are further implications aswell, the client still needs to pay a fee, so in effect is paying more over the course of the contract than they would have done had they had a total budget of 624, out of which the agency earned their margin. But the one off fee might be easy to hide, and the important thing in the meantime is that the client stays compliant. Additionally the interim would have be to directly engaged, an arrangement that is not always palatable for the candidate given they are at the mercy of the client’s payment terms.

Bottom line though, demand for interim managers hasn’t gone away. Price cap guidance will make trading conditions tricky, but the market will still function and find a way. I will keep blogging on the issue, but my own prediction is that over the rest of 2016 we will see greater efforts of compliance, which will yield partial success. A combination of growing need, plus potential workarounds will keep the market more or less functioning, although perhaps not as seamlessly as it has done over the last year or two. The result will probably be a slight reduction of average rates. And even if the NHS pays 10% less per interim manager rather than the c. 30-40% that might have been achieved through universal application of price cap guidance, it would still add up to a pretty hefty saving.