News story

NHS foundation trusts take action to limit the use of ‘off-payroll’ arrangements for senior staff

Most NHS foundation trusts are now fully complying with HM Treasury’s advice on off-payroll employment, according to a new report published by Monitor today.

Following its review of the tax arrangements of senior public sector staff, the Treasury made 4 recommendations to limit the use of off-payroll arrangements, and Monitor was commissioned to review how well foundation trusts are complying with them.

The Treasury recommendations followed concern about public sector organisations hiring senior people through personal service companies that pay corporate rates of tax rather than employing them on the staff payroll.

Last year, the Health and Social Care Information Centre carried out an initial investigation of how these recommendations were being implemented in the NHS. It found that 51 foundation trusts were failing in 1 or more of the Treasury’s recommendations.

Today’s report found that 21 of those foundation trusts have now successfully resolved all issues. On the remaining 30 foundation trusts, the report shows that:

  • 20 foundation trusts have 1 or more senior employees paid through an off-payroll arrangement, and they are waiting for responses after asking those employees for assurance about their tax arrangements
  • 23 foundation trusts (including some of the 20 above) still have at least 1 board member or senior member of staff with significant financial responsibility employed through an off-payroll arrangement
  • of these 23 trusts, 9 are facing wider issues relating to their performance which they have explained is affecting their ability to recruit and retain permanent skilled staff; this resulted in the need to use interim off-payroll contracts to attract high-performing staff to help improve the foundation trust’s situation
  • as a result of their performance issues, these 9 trusts are facing current enforcement action by Monitor, which is unrelated to their use of off-payroll employment
  • out of those 23 trusts, the other 14 which are not facing enforcement action have plans to end off-payroll arrangements by the end of the year

Jason Dorsett, Financial Reporting and Risk Director of Monitor, said:

“It’s important that both patients and taxpayers feel confident that NHS foundation trusts are well led and are following best practice in managing their finances.

“Our findings today highlight the important steps that foundation trusts are taking to follow HM Treasury advice about the use of off-payroll arrangements.

“The Treasury has made it clear that it expects all trusts to follow its advice on off-payroll arrangements. We welcome the fact that all trusts are taking action to end their off-payroll arrangements over the coming months. We will be looking at their accounts to make sure people paid with public money follow the rules set out by the Treasury, and if we don’t see enough progress we will consider whether further action is necessary.”

If foundation trusts with existing issues show no general improvement at the time of publishing their annual accounts, Monitor will consider what further action might be taken to make sure foundation trusts prioritise the implementation of the Treasury recommendations.

Published 10 July 2014