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ANNEX E

PUBLIC SECTOR PAY POLICY 2008-09: KEY FACTS

1. The policy for 2008-09 applies to public bodies with settlement dates between May 2008 and April 2009 (inclusive).

Strategic Aims

2. Government policy on public sector pay has three strategic aims:

d) To make sure that public sector pay increases are affordable and sustainable and, through the targeting of resources, that value for money is secured.
e) To provide flexibility within an overarching policy for public bodies to determine the pay and reward systems that are right for their business needs.
f) To make sure that public sector pay is fair and non-discriminatory.

Key Priorities

3. The tight financial context in Scotland over the next three years means that the key priority for 2008-09 is for public bodies to deliver affordable and sustainable pay settlements. Public Bodies should target resources at addressing:

• inequalities within pay and reward systems and structures; and
• recruitment, retention or motivation issues that directly impact on a public body's ability to deliver outcomes.

Pay Metrics

4. In 2008-09 the key metrics are:

1) The Increase for Staff in Post percentage

5. An absolute standard remit Increase for Staff in Post limit of 3.75% in any year will apply to the standard remit elements of all pay proposals:

• progression;
• the basic award;
• non-consolidated payments over and above the non-consolidated pot that is included in the baseline paybill;
• consolidated performance payments; and
• increases in the costs of overtime, allowances, employers pension contributions and National Insurance that result from the increases in pay and benefits that you propose.

6. Public bodies will, however, continue to include the costs of all increases in pay and benefits that they propose to make in the pay remit proformas, along with the increases to allowances, overtime rates, employers pension contributions and National Insurance that result. This will be the total increase for staff in post.

7. The one-off costs of harmonising terms and conditions of employment of different groups of staff as a direct result of the simplification of the public sector in Scotland will be noted in the proforma but will not count against the policy limits. Proposals which increase the pay or non pay benefits for the existing staff group, however, will continue to count against the policy limits. The advice of Finance Pay Policy should be sought in more complex situations.

2) The basic award percentage

8. An absolute Basic Award limit of 2.00% will apply for 2008-09.

9. The Basic Award can, however, be averaged over a multi-year deal. It must be delivered within the absolute standard remit Increase for Staff in Post limit of 3.75% in any year. A Basic Award below 2% must be applied to those grades where the maxima or target rates are more than 5% above the market maximum medians.

3) The new money or headline cost of the pay proposals

10. An absolute headline cost limit of 4.50% will apply to the total remit package (standard remit plus measures targeted at addressing the key priorities) in any year.

11. This is how much the paybill will increase by as a result of the total package of pay proposals for which approval is being sought. It can be less than the Increase for Staff in Post percentage where recyclable or other savings in the paybill can be delivered to reduce the cost of proposals to the organisation.

12. Increases targeted at the key priorities will fall into the following categories:

• Increases in benefits or non-pay rewards, for example reduction in working hours or additional leave. Such proposals have notional cost benefits for staff but do not add actual costs to the paybill;
• One-off increases, for example buying out terms and conditions of employment that are now outdated. These are actual costs to the paybill but are limited to a single year;
• Increases with ongoing cost implications, for example:
• Addressing inequalities by reducing progression journey times;
• Addressing particular issues such as low pay and recruitment, retention and motivation of staff by adjusting pay range minima, maxima or target rates. Recruitment will be an issue if there is evidence of starting pay above the median of the existing salaries for that pay range for more than 25% of new staff and retention will be an issue if there has been turnover of more than 10%.
• Restructuring of pay and reward systems, these costs usually relate to the assimilation of staff onto a new structure in the first year. As a result such proposals will be assessed against the headline cost limit of 4.50% and the future projected costs for the standard remit elements (see below). If proposals do also include the costs of progression and/or a basic award then the policy limits will apply.

13. Proposals must not result in pay range maxima being more than, or extend further from, 5% above the relevant labour market maximum median. The relevant labour market is expected to be the public sector labour market in Scotland for most staff, and this market data is being provided by Finance Pay Policy. This data will be used to assess proposals in the first instance.

14. In exceptional cases, where a more specific or specialist labour market is appropriate public bodies may provide additional market data. Such data should reflect who public bodies actively compete with for staff and should be accompanied by an explanation setting out why it is a more relevant labour market. There should also be a clear link, based on job weightings, between the posts being compared and comparisons should be made on a like for like basis. If you think that you have a specific or specialist labour market you should discuss the position with the Finance Pay Policy team in advance of the collection of relevant data.

Multi-year remits

15. During 2008-09 public bodies may negotiate and put in place pay awards for one or more years, Knowing the level of pay increases for future years brings certainty for employers and staff, but the length of any pay deal is a matter for each public body and its recognised trade unions. Public bodies are expected to set out their plans in their business case and if not proposing to enter into a multi-year pay deal provide a short explanation.

What do public bodies need to do to obtain approval for a pay remit?

• Make sure that proposals are in line with the details of the policy set out in the published policy documents;
• Set out proposals that are within the policy's absolute limits set out above;
• Demonstrate that the standard remit elements do not lead to an increase for staff in post percentage greater than 3.75%;
• Demonstrate that proposals above a staff in post percentage of 3.75% are targeted at the key priorities and do not lead to a headline cost for the pay remit package greater than 4.50%;
• Support proposals with a business case that takes account of the requirements and expectations of the policy;
• Make sure that proposals are affordable within existing budgets and that the business case clearly sets out how the proposals will be funded;
• Demonstrate that proposals are sustainable by providing a 3 year projection that shows that after addressing any particular issues, the resulting standard remit will be deliverable within a 3.75% Increase for Staff in Post limit (on a basic award of 2% assumption).
• Start working on proposals early, attend the policy seminar and workshops and submit the remit on time; and
• Speak to the Finance Pay Policy team if you need help, by telephoning 0131 244 7341 or by emailing financepaypolicy@scotland.gsi.gov.uk .

Finance Pay Policy
April 2008

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