« Previous | Contents | Next »
Listen
ANNEX B
APPROACH TO THE ASSESSMENT OF PAY REMITS
1. This approach to the assessment of pay remits sets out the questions that will be asked of every pay remit and seeks to clarify what would constitute a contentious pay remit requiring the approval of Ministers. It is subject to ongoing revision.
Market
2. The guidance for public sector pay groups in Scotland makes it clear that the comparison, between the total reward offered by the public body and those offered by organisations with which they compete for jobs, is key to determining which pay band the pay award should fall into. Key questions therefore are:
- Has factual evidence of where the public body has recruited staff from or lost staff to been provided?
- Does this evidence tie up with the comparator organisations quoted in the business case? Are there gaps which potentially indicate the "cherry picking" of the most advantageous comparators? Is the Sponsor division satisfied that comparator organisations are fully representative of their active labour market?
- Do comparators reflect the local labour market? Remits will be judged on the extent to which levels of pay for particular groups of staff reflect, and are responsive to, the relevant labour markets in which they operate.
- If the Executive has been included as a comparator organisation has evidence of a common labour market been provided?
- Are comparator bodies principally in the private sector? If so is this appropriate?
- Are comparator bodies based elsewhere in the UK? Does the body offer regional allowances? Are the bodies comparable in terms of workload and responsibility? It is for this reason, for example, that the salary of MSPs is 87.5% of that of MPs.
A contentious pay remit would not provide evidence of the active labour market or makes a business case based on inappropriate comparisons.
Total Reward
3. Where the appropriate market has been identified, attention then needs to be turned to what the market data is illustrating:
- Have comparisons been based on total reward, not just pay?
- Are the proposals out of step with the minima and maxima offered by other public bodies in Scotland whose remits require Ministerial approval?
- If above the market, the presumption is that the body should be seeking approval for a remit in the range of 1.5-3.5% increases for staff in post, and would need to make a robust case for more than 1.5%.
- If below the market, the presumption is that the body should be seeking approval for a remit in the range of 3.5-4.0%, and would need to make a robust case for more than 3.5%.
- Does the market identify particular issues with specific grades, bodies of staff, specialisms or locations?
- Is there evidence that local pay differentiation has been considered as part of the pay strategy?
- Is the remit targeted in line with the particular issues identified? Does it demonstrate how they intend to use their remit to address the particular problems or issues?
- Evidence to support increases in minima or maxima for certain grades does not justify across-the-board increases.
- Is there evidence of restraint for those staff in the organisation who are relatively well placed in their relevant labour market?
- Is the case for reducing or maintaining the differentials supported by information on the benefits from doing so (such as helping to achieve efficiency plans; promoting the delivery of public services and improving recruitment and retention and motivation (see below))?
A contentious pay remit would not take account of the total reward package; seeks approval for proposals with across the board increases; submits proposals that are not targeted in line with the evidence provided; where no consideration has been given to local pay differentiation; has proposals which are out of line with the expected pay band for the body; provides no evidence of restraint for those staff whose remuneration is market facing; or does not clearly demonstrate the benefits of reducing the differentials.
Recruitment, Retention and Motivation
4. One of the key factors for approving a pay remit in the upper band is the existence of recruitment and retention issues resulting from the body being uncompetitive in the market place. Key questions here are:
- Has information on the level of turnover in the organisation been provided?
- Have reasons of why the level of turnover is problematic been demonstrated?
- Has evidence of actual recruitment and retention difficulties been provided?
- Has evidence of why staff have left the organisation been provided? Retention may be affected by a number of reasons including organisation behavioural factors.
- There should be no automatic presumption that pay is either the cause or the cure for issues that have been identified.
- Evidence of recruitment difficulties could indicate that pay band minimas are uncompetitive.
- Evidence of retention difficulties may indicate that progression arrangements or pay band maxima are uncompetitive.
- Motivation issues raised in support of a business case should include evidence that the cause of such issues lie with the rewards offered (such as evidence from staff surveys).
A contentious pay remit would not provide evidence of real and actual recruitment and retention or motivation issues but is nonetheless seeking to rely on a business case based solely on uncompetitiveness in the market in light of pay differentials identified.
Basic Award
5. This is the cost of living or inflation increase and relevant questions/points to note are:
- The policy states that this element of the pay remit will be no more than 2.0%.
- There should be no expectation that the full 2.0% basic award applies.
- The pay remit proposal as a whole should be considered (some organisations seek to argue that progression and the basic award are separate and that staff perceive the basic award element as their pay award).
- It is possible to revalorise all of the progression spine points except the maxima where the maxima is already significantly above the market.
A contentious pay remit would seek approval for revalorisation in excess of 2.0% or would automatically seek to apply a 2.0% revalorisation across- the- board.
Progression
6. The costs of progression form a significant element in any pay award for most organisations and therefore careful consideration has to be given to the progression system in operation:
- Any pay remit (including proposals for progression and the basic award) is only approved for its duration, be that single or multi-year. In pay policy terms therefore progression arrangements can and should be subject to scrutiny on application of a new pay remit.
- What is the longer term affordability and sustainability of the progression proposals?
- The pay policy guidelines have required bodies to ensure that all legally binding commitments take into consideration affordability and financial constraints in current and future years. Any arguments that progression is guaranteed should be challenged.
- The general expectation is that progression steps should be around 2.5%. Anything significantly above this makes it difficult for the organisation to submit a remit below 3.5% once the basic award has been included.
- If progression is accounting for a significant percentage of the increase for staff in post then consideration has to be given to how the costs of progression might be reduced.
- An increasing number of public bodies have introduced "guaranteed" journey times from minima to maxima. Are the journey times reasonable? However, care has to be taken in considering the equalities implications of any amendment to journey times.
A contentious pay remit would seek approval for proposals where progression accounts for a large proportion of the increase for staff in post particularly where this is attributable to large percentage progression steps; or progression is unaffordable or unsustainable in the period beyond the agreed pay remit.
Fair Pay
7. Public Bodies have in the past been asked to undertake equal pay audits:
- Public bodies are expected to manage their equal pay risk within the Public Sector Pay Policy parameters.
- Where there is a specific pay inequality which the body wishes to address they will need to provide evidence of the extent of this inequality and propose ways of tackling it in a cost-effective manner, subject to affordability constraints.
- Has the proportion of the remit, if any, devoted to addressing issues associated with tackling equalities issues been specified?
- Pay remits should adhere to the current status of employment law in all respects, not just in terms of equal pay.
A contentious pay remit would seek approval for additional increases for staff in post as a result of potential equal pay cases without evidence of any actual inequality or would seek approval outwith Public Sector Pay Policy parameters.
Other factors
8. A number of other factors may be also require to be taken into account when considering individual pay proposals:
- Changes to terms and conditions: all proposals should detail and provide costs for all proposed changes to terms and conditions. Even when the costs are argued to be notional they will still count in the increase for staff in post. Public Bodies should state that they do not propose to make any changes where relevant.
- Restructuring: All restructuring costs require to be costed within the remit. Whilst it is recognised that there could be some costs associated with restructuring it does not imply automatic approval to a higher award. Proposals must provide evidence of any market displacement.
- Affordability: all proposals should confirm that the remit can be afforded within existing budget provision.
- Baseline savings: has consideration been given to identifying savings to off-set the new money that would have otherwise been required? This would reduce the cost to the public purse.
- Performance related pay: the pay system should be based on rewarding performance, including out-performance.
A contentious pay remit would seek approval for changes to terms and conditions that are not fully costed in the increase for staff in post; would seek a higher award for restructuring that is not supported by the market or is not affordable within existing budget provision.
Summary
9. In brief a pay remit is non-contentious if it is supported by a business case which:
- provides evidence of the appropriate market;
- identifies market differentials;
- provides evidence of recruitment or retention difficulties arising as a result of the uncompetitiveness of the rewards offered;
- targets resources at the specific issues that have been evidenced;
- contains progression and basic award proposals which are justified (as opposed to defensible); and
- falls within the expected pay band for the body.
FINANCE PAY POLICY
July 2007
« Previous | Contents | Next »