Furloughing staff in dental practices with private and NHS income

Covid-19 has affected all businesses regardless of what they do. Dentists are also facing extreme challenges to ensure that they are going to financially survive the fallout effects of the Covid-19 pandemic. All practices in England have been encouraged to provide a basic service, treating patients by triaging and telephone and still issuing prescriptions where appropriate. However, there is a financial impact on the ongoing income and expenses of the practices and the government has provided support to help mitigate the adverse effects.

There are two state schemes that have been introduced to help dental practices.   

  1. The government backed scheme that enables staff to be furloughed at 80% of pay and the practice reclaim the same 80% from the government.
  2. The NHS contract will continue to be paid to the practice, subject to certain conditions.

Government guidance regarding furloughing can be found here:

https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-guidance-for-employees

So what are the conditions?

If the practice is receiving funding from the NHS contract, then they will not be entitled to take advantage of the government backed furlough scheme. This statement has obviously caused great concern in mixed practices.

Mixed practices have now been provided with confirmation from NHS England and the Treasury that the furlough scheme can be utilised in proportion to their private activity and the rules regarding not being able to apply for government backed funding is in relation to the NHS dental income only.

The steps for mixed practices are as follows:

  1. Calculate your NHS income and Private income percentage of total income
  2. Calculate the private percentage of turnover multiplied by the monthly staff wages costs
  3. The practice can claim pay for the 80% funding in relation to any furloughed individuals up to the level of the proportion calculated at step 2 and will have to use its ongoing NHS funding or other resources to make up any extra costs for furloughed staff.
  4. Practices will have to consider the members of staff and whether they can be furloughed or be redeployed. If a practice has to close, NHS staff may be redeployed in other areas to ensure the NHS funding continues.

An example provided by the BDA regarding how to calculate the percentages is below:

For example, say a practice income is £1m a year. Say £400,000 of that income is from private patients and £600,000 is from the NHS. The private income is therefore 40% of the practice income. Say the annual wage bill is £300,000. Say this crisis lasts 3 months (25% of the year).

During that three-month period, the wage bill is 25% of £300,000 = £75,000. The practice can claim 40% in respect of the £75,000 (£30,000) wages from the furloughed workers scheme. As employers can only claim 80% of the wages, the amount the employer can claim, and should pay staff, is 80% of £30,000 = £24,000. The remaining £45,000 should come from the continuing NHS contract payments.

The BDA guidance is provided here and is being updated regularly.

https://bda.org/advice/Coronavirus/Pages/financial-impact.aspx#nhs

Further guidance will be issued by NHS England in due course and updates will be made available when the information is received.

What can we do to help you?

MHA Moore and Smalley has a specialist healthcare team who work with a number of dental practitioners.

During the Covid-19 pandemic, we appreciate that the sector is under extreme pressure to efficiently run some essential financial functions. We are able to provide temporary support to relieve the burden where possible and deliver finance functions which may have previously been done in house. Examples of this include;

  • Preparing management accounts
  • Cash flow planning
  • Raising finance
  • Payroll Services

If you would like further information on this then please contact Lisa Pennington on 01253 404404 or email lisa.pennington@mooreandsmalley.co.uk