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GPs’ and managers’ recruitment questions answered
Recruitment difficulties are bringing lots of questions to AISMA accountants’ doors
Andrew Burwood** answers some of the big issues
What are potential partners looking for when assessing a practice?
In no particular order:
- An acceptable profit share and monthly drawing (including phased routes to parity)
- A stable partnership now and for the foreseeable future
- An achievable work/life balance
- The potential to specialise
- An ability to contribute to the decision-making process of the partnership
- Whether there is a requirement to buy-in to the partnership assets
- What the working capital requirement is
- An ability to establish relationships with patients
- Information on the size of the partnership and the likelihood of being able to work well together
- The opportunity to train and teach
- Maternity/paternity leave (agreed time off and financial arrangements)
- Holiday/sabbatical leave.
How can we attract a new partner?
The simple answer is that it is becoming more and more difficult given the number of GP retirements and the fall in the numbers of trainees wishing to pursue a general practice career.
Location is a key starting point and unfortunately some areas of the country struggle to attract GPs more than others.
Areas to consider, to make the practice more attractive:
- Training practices do have the ability to assess GP registrars while they are employed by the partnership. If an individual shows a desire to remain in general practice and fits in with the practice ethos, there is an opportunity to ‘grab them’ before a rival practice shows an interest.
- Review your partnership deed to make sure it is fit for purpose. Are there any clauses included which would put a potential partner off?
- Encourage flexible working hours.
- Does an incoming partner have to buy-in? Newly-qualified GPs are likely to have large student debts, significant property mortgages and young families - or they are on the horizon.While interest rates remain low, surgery valuations continue to rise and the requirement to take out a further loan to finance a buy-in can be a deal-breaker. Surgery sale and leasebacks are a potential option but these require a considerable amount of thought and the decision should not be taken lightly.
An alternative is to finance partnership assets by way of a single partnership loan. Banks remain keen to lend to GP partnerships and, while the incoming partner will take on a share of the debt, it is less daunting to do that as opposed to arranging a large personal loan.
- Partnerships have historically worked on a phased route to parity in profit-sharing arrangements. Given the shortage of candidates, it is likely this is no longer achievable (unless the practice is very profitable).
- ‘Super-partnerships’ are very topical right now but any change has pros and cons. Positives include potential economies of scale, opportunities to specialise and strength in numbers. Negatives include a potential loss of control, loss of patient relationships and a lack of cohesiveness.
- Advertising is incredibly expensive so you need it to make an impact. Focus not only on the practice but also the selling points of the location and its proximity to landmarks and places of interest.
- Interviews can be a stressful experience and you need to make the potential recruits feel at ease and wanting to join your practice. Freeing up partner time to carry out positive interviews is an absolute must and preparation is key. First impressions do count and it is vital to ensure that a good one is created.
- If cash-flow is having a detrimental impact on partner drawings, consider the use of a bank overdraft facility. Interest on the facility is deductible for tax and superannuation purposes and therefore the net cost per partner is unlikely to be punitive.
- Allow potential recruits to discuss practice finances with your accountant. Your accounts are complicated and having an expert demystify them for future partners is an excellent selling tool.
Should we employ a salaried GP?
This very much depends on practice circumstances. If you have an aging partnership and are looking at succession, a salaried GP may not be the best answer.
But if the appointment is salaried with a view to partnership, it does give both parties the opportunity to assess if it is a good fit.
With partner profits falling, the difference between the costs of employing a salaried GP and taking on a partner is now much smaller.
An employed individual will not only cost the gross salary and medical defence subscription, it will also incur employers’ National Insurance (13.8% for earnings over £8,112 a year) and employers’ superannuation (14.3%).
There will also be the usual contractual rights of holiday and sickness pay to factor in. And you need to consider the fact that the employee will have very little interest in the running of the business and will not have an active management role in it.
Of course, the number of GPs who now see themselves spending a significant proportion of their career at one practice are few and far between and so a salaried arrangement may be more attractive to a high number of potential recruits.
The key is to be flexible. If an individual is desirable, it is likely that you will have to be more accommodating than perhaps you have been in the past to make them choose your practice.
What is the average pay for salaried GPs?
There will be regional variances. In East Anglia, we would expect to see a full-time equivalent GP earn in the region of £75-80k a year (plus medical defence). Market forces do dictate the level of salary and the amount you pay will very much depend on your location.
How do we calculate the buy-in amount for a new partner?
The buy-in will normally cover the following components:
*A share of the surgery premises (based on a formal valuation by a qualified surveyor with experience of GP surgeries and rent reimbursement).
*A share of other fixed assets (usually based on written down values as shown in the partnership accounts).
*A share of the stock and working capital requirement (the amount of cash left in by the partners to cover day-to-day requirements).
It is possible that the partnership may also hold shares in a local consortium. If that is the case, the buy-in will also have to factor in a share of the value of these.
If any of the assets are financed through a partnership bank loan, the balance remaining on the loan is deducted from the value of the gross assets.
While not always the case, the share is usually based upon the individual’s working time commitment. So, for a six partner practice with two full-timers, two three-quarter timers and two half-timers, with the incoming partner being full-time, the share would be 2/9ths (1 out of 4.5 full-time equivalents in total).
And how about calculating the amount owed to a departing partner?
The partner will need to be paid for his/her share of the assets as mentioned above along with any undrawn profits to the date of retirement. These will be calculated by the partnership accountants in line with the terms of the partnership agreement and the payment terms will also be specified within the agreement.
We have not been able to replace a retired partner and are now due to pay him/her out; what do we do?
This is becoming a more common scenario. Basically the remaining partners can either acquire greater shares of the partnership assets, i.e. pay capital in to finance the capital owed to the retired partner, or arrange a partnership bank loan to pay the retired partner out.
The latter will put additional pressure on practice cash-flow and may necessitate a reduction in drawings; the practice accountant will be able to advise you on this.
We have been successful in recruiting a new partner; what forms do I need to complete?
Under a GMS contract, NHS England must have 28 days’ notice of a new partner joining.
A PMS contract is slightly different as contracts are held between NHS England and the individual practitioner rather than the partnership.
Taking on a new partner would be treated as a variation to the contract and so it will be important to discuss your plans to recruit a new partner before actually doing so.
Under both contracts, NHS England’s Local Area Team will need to be advised of the admission of a new partner and will also need an estimate of pensionable earnings to enable superannuation contributions to be deducted from gross practice income on a monthly basis.
Your accountant will be able to assist with the completion of forms required by HMRC. If you are a VAT registered practice, you will also have to complete form VAT2.
**Andrew Burwood is a senior manager at Larking Gowen specialist medical accountants
This article first appeared in the Winter 2016 issue of AISMA Doctor Newsline, the newsletter of the Association of Independent Specialist Medical Accountants.