Points to watch about PCN staff employment

This article first appeared in the Spring 2022 issue of AISMA Doctor Newsline, the newsletter of the Association of Independent Specialist Medical Accountants.

Tread carefully. Alison Oliver sets out some legal considerations when using PCN companies to employ staff.

A tricky issue for primary care networks (PCNs) has been how to go about employing their staff. Some PCNs appoint a lead practice to employ staff on behalf of all practices. Others share employment responsibilities across all practices.

Many PCNs are forming companies to employ staff on their behalf. Some subcontract the employment to other organisations, such as GP federations.

Why can’t PCNs employ staff themselves and how do practices get around this?

PCNs are unincorporated networks of practices. They are not legal entities in their own right. They cannot, therefore, employ staff themselves. This has resulted in a range of employment models emerging, including:

  • Practices within a PCN sharing responsibility for employing PCN staff. So, for example, practice A might employ a clinical pharmacist and practice B might employ a social prescribing link worker, but those staff are shared between all the PCN practices
  • A single lead practice employs all PCN staff on behalf of the PCN
  • PCNs form a company to employ the staff on behalf of the PCN, and
  • PCNs contract with other organisations, such as a local hospital trust or GP federation, to employ PCN staff.

Many PCNs are now forming their own companies as an employment vehicle and this is the model which is the main focus here.

Why form a PCN company as an employment vehicle?

One of the risks of PCN practices employing shared staff themselves is that they are not protected from arising employment liabilities. A limited company has its own legal personality and can enter contracts in its own right.

A company’s shareholders are protected from the company’s liabilities. By forming a company owned and controlled by themselves the practices can employ staff and ringfence those employment liabilities within the company while still retaining control over the employment vehicle.

What is the company role?

One issue to consider is whether the company is performing a managed service or is purely a supplier of staff to the PCN practices. The practices in a PCN can delegate responsibility for all or a particular aspect of the network contract directed enhanced service (DES) to the company.

In this scenario, the practices remain directly accountable to the commissioner for delivering the DES but pass on some of the responsibility to the company under a sub-contract or similar arrangement.

The company employs the staff, who work under the company’s control and supervision to deliver the subcontracted services. As a clinical subcontractor, the company will be providing regulated activities and will need to be registered with the Care Quality Commission (CQC) as a provider of those activities.

If the company is purely acting as an employment vehicle, the practices retain responsibility for delivering the DES, but the company employs the staff and supplies them to the practices. In this model, the company could well be operating as an employment business.

What is an employment business?

The Employment Agencies Act 1973 defines an employment business as a business involved in ‘supplying persons in the employment of the person carrying on the business, to act for, and under the control of, other persons in any capacity’.

The determining factor is who has predominant control over the staff member. If the PCN company manages the staff and has predominant control over what they do and how they do it while they are working for the PCN practices, then it is probably not acting as an employment business.

If, however, the PCN practices manage the staff and have predominant control over what they do, this looks more like the company is supplying staff to the practices and therefore acting as an employment business.

The fact that the supply of staff is not the core business of the supplier does not preclude them being an employment business. Interestingly, this means that a practice employing PCN staff and supplying them to other practices could also be caught by the Act.

What does it mean if the PCN company (or a practice) is an employment business?

An employment business must comply with the Conduct of Employment Agencies and Employment Businesses Regulations 2003. These set out various technical requirements, which include:

  • Providing a ‘Key Information Document’ with certain prescribed information; and
  • Various restrictions on fees and notice periods.

Other considerations

There are various other considerations for PCNs when considering their employment model, including:

  • NHS Pension Scheme access – if the PCN staff are to be members of the NHS Pension Scheme, their employer must either be an employing authority (for example by virtue of holding a primary care contract) or apply for a special direction which confers temporary access for certain PCN staff;
  • PCN staff contracts – the contracts with staff should make clear that they are required to work across various practices and make clear who has line management responsibility for the staff;
  • VAT – the supply of staff (as opposed to a supply of medical services) is likely to be a standard rated VAT supply. PCNs should therefore take specialist tax advice on their structure;
  • Sub-contracting requirements – PCNs must obtain consent from their commissioner before subcontracting any DES services and comply with the requirements of their primary care contracts when subcontracting any clinical services; and
  • Risk and liability sharing – PCN practices should always have an agreement in place between themselves and with any organisation that employs staff on their behalf which makes clear how employment risks and liabilities will be shared.