Since 1 April 2013, GP practices in England and Wales have been responsible for paying the employer's pension contributions (to the locum) for the locums they engage. Prior to this date, Primary Care Organisations (PCOs) were responsible for the pension payments.
In Scotland and Northern Ireland, employer’s pension contributions for locum GPs are unchanged and will remain the responsibility of the PCOs.
Advice for practices
|This is general guidance for practices. For tailored advice you should seek personal financial assistance.
Any practices who are unclear of their responsibilities relating to employer’s pension contributions must contact the BMA’s Employers Advisory Service.
Employer's pension contributions is statutory
Under the new pension regulations, it is the 'employing authority' (i.e. the practice) that must pay the employer’s contribution. Practices must pay the 14.3% employer’s pension contribution (which is calculated using 90% of the locum fee) to the locum on top of any locum fees for locum GPs who are contributing to the NHS pension scheme.
Since April 2017 an additional 0.08% pensions administration charge has been added to be deducted along with the employer contribution. The practice is responsible for paying the employer’s contribution to the locum; the locum is responsible for ensuring the employer’s contribution is passed on to Pensions Agency via Primary Care Support England.
The employer’s pension contribution is based on the locum’s pensionable income only, which is 90% of their total fee. The remaining 10% is regarded by the Pensions Agency as covering expenses. Once paid by a practice, the locum must pass on the payment to Primary Care Support England who administer the practitioner pension on behalf of NHS England or to the Local Health Board in Wales.
Legally, the practice is liable to pay the 14.38% (including the pensions administration charge), not the individual partner requiring locum cover.
Practices should note that payment of the employer’s contributions is now a statutory requirement. The Pensions Agency will report practices that refuse to pay the 14.38% contribution to the Pensions Regulator and legal action may be taken against them.
The NHS Business Services Authority's Employers Newsletter (April 2013) confirmed that practices must now pay the contributions.
GP practices could face legal action if
• They fail to pay employer’s pension contributions;
• They alter locum’s fees solely to avoid paying the additional 14.3% employer’s pension contributions; and
• Groups of practices in a particular area agree a set locum fee as this breaches anti-competition law.
The cost of employer pension contributions is accounted for through the global sum.
Consider pension payments when reclaiming locum costs
GP partners should take the employer’s pension contribution into account when claiming back the cost of locum cover when they are absent from the practice, for example for CCG work.
Review insurance cover
Practices are advised to review their locum insurance policies to ensure that they have sufficient cover for the additional cost of employer’s pension contributions of locums.
Locum Forms A and B
The Department of Health expects locums to invoice practices with a separate charge for the employer’s pension contribution, on top of their fee.
Locums complete Form A and Form B to show their pensionable income. The forms have been updated to include a separate box for the employer’s contribution.
When the practice receives the completed Form A from the locum, they will be asked to state the locum fee paid, the total employer’s pension contribution paid, and the total amount paid to the locum.
The forms include a warning legal disclaimer to state that practices must pay the 14.38% employer’s contribution. Practices should retain copies of all forms for audit purposes.
Updated versions of Locum Form A and Form B are available on the NHS Business Services Authority website.
When charging for mileage, some locums list a separate expense on their invoices and others include it in the total fee. Whatever amount is entered into Box 1 on Locum Form A is the amount that will be used to calculate the pensionable income and the employer’s contribution.
Practices should not expect locums to separate mileage from their fee in order to reduce the total entered into Box 1.
Longer term locums
The change to employer’s pension contributions will not affect the current arrangements for longer term locums. After six months of continuous work with a practice, the locum is regarded as a Type 2 Practitioner for the purposes of the pension scheme.
The practice must then administer and pay their pension contributions as for a salaried GP. Locum forms A and B cannot be used in this situation.
Practices should also take advice about the taxation position of long term locums and consider use of the ESI (Employment Status Indicator) on the HMRC website.
Employer’s pension contributions are not payable to the following locums:
- Locums who are not part of the NHS pension scheme (a locum may only treat income earned from certain contracts as pensionable pay);
- Locums who work through locum agencies that are not recognised NHS employing authorities (and who therefore cannot pension their income); and
- Individual locums trading as limited companies.
How we got here
In England and Wales, the funding for locum pension contributions was moved from PCO budgets and transferred into Global Sum Equivalent payments for General Medical Services (GMS) practices. An average GMS practice with around 7,000 patients received an extra £1,000 a year as a result .
The Department of Health stated that NHS England (formerly the NHS Commissioning Board) will decide how locum employer pension contributions will be funded for Personal Medical Services (PMS) and Alternative Provider Medical Services (APMS) practices.
All practices are responsible for funding the employer’s contributions. However, the administrative process is such that locums themselves must pass on the employer’s contribution for any pensionable income to PCSE at the same time as they pay their employee contributions.