The system is led by an independent pay review body (PRB), set up to try and prevent disputes between the government and unions over pay.
This takes evidence from the government, unions and employers before deciding on a pay rise for nurses, midwives and allied health professionals.
It then recommends a pay rise to the government, which is then usually expected to announce the pay award in time for the new financial year, beginning in April.
But since October 2005, when the process began for the 2006-2007 pay rise, the government has been accused of attempting to bully the PRB into giving a low award.
First the chancellor and then health secretary Patricia Hewitt wrote to the PRB attempting to get it to reduce nurses’ pay award to 2%.
But in April 2006 the PRB maintained its independence and gave nurses 2.5%, the same as teachers.
The announcement was delayed by several weeks amid rumours that Tony Blair had intervened to prevent Gordon Brown staging the pay award.
The process for the 2007-2008 pay award has been even more fraught, with the Department of Health giving its evidence in late.
Its evidence was also highly emotive and warned that giving nurses a higher pay rise would mean hospitals would have to make further redundancies.
Once the review process was over and the PRB passed on its recommendations to the government it was reviewed by a public sector pay committee, consisting of treasury chiefs and ministers from other departments.
Unions’ worst fears were realised when in March, the chancellor chose to stage the 2.5% award given by the PRB.
This means that nurses in England will receive a 1.5% from this April and a further 1% in November. However this increase has been delayed because health unions have rejected the offer.
To make matters even more confusing, nurses in Scotland have been offered the full 2.5%.
Nurses in Wales have been offered the staged award and nurses in Northern Ireland are also likely to receive the same.
The RCN, Unison, Amicus and the GMB have all opposed the staged award and are threatening industrial action.