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6. CHAIRS AND MEMBERS: FRAMEWORK

Who is it for?

6.1 This part of the pay policy applies to public appointments to NDPBs and public corporations; Non-Executive Directors of the Scottish Government and its Agencies and Associated Departments; Chairs and Board Members of NHS Bodies; the fees paid to Judicial appointments and appointments to Tribunals, Appeals Boards, Royal Commissions, Advisory Committees and Inquiries, etc. The terminology may vary: the Chair may be known as a Convener, President or the like; and Members may sometimes be named with reference to their qualifications (such as legal or medical members, etc.).

6.2 This part applies equally to the introduction of remuneration for Chairs and Members of Scottish public bodies or where a revision or change to that remuneration is proposed. The pay policy on annual uprates is set out in Section 7.

What is the background to the policy for Chairs and Members?

6.3 Chairs and Members are public appointments, but not all are remunerated. Public appointees such as Chairs and Members benefit in a number of non-financial ways, for example: in the enhancement or application of professional expertise; general networking and personal development; or the opportunity to contribute to policy-making in an area of personal interest. The main objective in remunerating such posts is to increase diversity. Remuneration may be proposed where it is particularly important for bodies to have Boards drawn from as wide and diverse a range of candidates as possible or where there is specific need for Members drawn from otherwise under-represented groups.

6.4 Remuneration recognises a Chair or Member's personal commitment and contribution to the work of the public body. However, any remuneration payable is not intended to meet in full the market rate that could be commanded by the individuals concerned.

6.5 Some public bodies are also charities. In such circumstances, the Chair and Members will work on a voluntary basis and will make no financial gain from the charity. Payments, other than reasonable out of pocket expenses, cannot be made unless in specific circumstances (you should consult the Finance Pay Policy team for further details).

What is a daily fee and what is it for?

6.6 Where Ministers have agreed that the Chair or Members should be remunerated, then this is by way of a daily fee. The remuneration of Chairs and Members must always be based on a daily fee rate as this is the most appropriate and flexible arrangement which allows for payments to match the time worked. This may be expressed in terms of daily, ½ daily or hourly rates for calculating payments, but changes to the number of days worked should not result in changes to the level of daily fee paid. The cost of any remuneration is met from the public body's existing administration costs.

6.7 If a daily fee is paid to Chairs and Members, then payment of it should reflect the time commitment involved. The daily fee should cover reasonable time spent by individuals in undertaking their agreed duties effectively, though there must be clear prior agreement on which activities are to be remunerated. A daily fee can therefore cover activities other than attendance at board meetings or functions; for example, time spent preparing for meetings, time travelling to and from meetings, etc.

6.8 The daily fee and the activities covered by it should be agreed between the public body and the Sponsor Team, recorded formally and embodied in the letters of appointment issued to the Chair and Members. The agreement must abide by the general requirements of the Scottish Government's Public Sector Pay Policy for Senior Appointments and may be reviewed from time to time or at the request of the public body or Sponsor Team. There must also be a formal and proportionate arrangement in place for the claiming of daily fees which should be subject to audit by the public body.

6.9 In relation to fees, letters of appointment may refer to a monthly or annual amount, as long as it is based on the approved daily fee multiplied by the 'contracted' number of days worked per month / year. The contracted number of days is the number of days stated in the letter of appointment expected to be worked (per month / year) as a result of the appointment.

6.10 It may be more convenient to remunerate Chairs and Members monthly, but problems may arise if the person works more or less than the contracted number of days.

6.11 If the remuneration is paid monthly, on the basis of, say, a contracted four days a month and a Chair or Member is committing eight days a month (perhaps because of the number of meetings or due to travel time to and from meetings) they should be recompensed for this. In this situation, their daily fee has, in effect, reduced.

6.12 Conversely, if the remuneration is paid monthly, on the same basis of four days a month, and a Chair or Member spends, say, only two days a month in relation to their appointment then clearly they are being recompensed for days they have not worked. In this situation, the daily fee has, in effect, increased.

6.13 If a public body or Sponsor Team limits the (annual or monthly) remuneration irrespective of the number of days actually worked and Chairs or Members feel that they are not being remunerated sufficiently for the time invested by them, then this is not an issue about the level of the daily fee but one about being fully recompensed for their time commitment. This is therefore a budgetary matter for the Sponsor Team rather than a daily fee issue for Finance Pay Policy: it is not in itself justification for increasing the daily fee. Changes to the number of days worked should not result in a change to the level of the daily fee paid or the effective daily fee received.

6.14 Chairs and Members are not employees of the public body or of the Scottish Government (and so are not paid a salary). Public bodies and Sponsor Teams should therefore exercise care when drafting letters of appointment or advertisements to avoid references to salary or employment or giving an impression of such as there may be tax and other implications. For example: if such persons are considered as salaried, then this might give rise to (and possibly claims for) other employer obligations like annual leave, sick pay, maternity, redundancy, etc. Furthermore, the venue for meetings could be regarded as the 'normal place of work'; in which case the Chair and Members would not be able to claim travel expenses, as travel to a 'normal place of work' is not payable..

What about fixed salary elements?

6.15 In the past, in addition to a daily fee, certain Chairs and Members also received a fixed salary element. This was a fixed sum which was paid annually in addition to daily fees and was usually only made available to those public appointments with a commitment of more than 12 days per annum. This policy ceased in 2004 with daily fee rates increased by a proportionate amount at that time. Public bodies and Sponsor Teams were advised to revise this arrangement at the earliest opportunity (for example, when the post was reappointed). After five years, a fixed salary element should no longer be paid to Chairs or Members.

What is the Daily Fee Framework?

6.16 To ensure consistency and comparability across public bodies, a number of remuneration bands have been developed within the Daily Fee Framework. Appropriate rates of remuneration should be determined within this Framework. Each public body is allocated to one of the bands by reference to the significance of the body - based on its size (staff numbers) and the resources managed (budget / grant), as well as consideration of its likely public profile. As a broad rule of thumb, Band 1 bodies include a small number of the most significant Scottish NDPBs and public corporations; Band 2 includes the majority of Executive NDPBs; and, Band 3 includes the smaller NDPBs, advisory bodies and other ad hoc groups, etc.

6.17 The 'Tribunal' band within the Chair and Members Daily Fee Framework was introduced last year and deals with the daily fees for Scottish Tribunal NDPBs and other tribunal bodies (where approval of the Scottish Government Remuneration Group has been obtained to allocate to this band). This band currently covers the seven Scottish Tribunal NDPBs (listed below) and the Pension Appeals Tribunal.

• Additional Support Needs Tribunal for Scotland
• Lands Tribunal for Scotland
• Mental Health Tribunal for Scotland
• Parole Board for Scotland
• Private Rented Housing Panel
• Scottish Charity Appeals Panel
• Children's Panel

6.18 New Tribunal bodies would generally be allocated to the Tribunal Band, with certain members being allocated to Band 1. The bands will apply to Chairs and Members in the following way:

• Chair of the public body - Tribunal Chair band
• Non-Executive Board Members of public body - Band 1 Member band
• Specialist Members (for example: those required to have professional qualifications or specialist knowledge, such as legal and medical Members) - Tribunal Member band
• Lay-person Members - Band 1 Member band

6.19 A member of a Tribunal who acts as a convener of a tribunal hearing may receive a higher daily fee than other members so long as that daily fee remains within the appropriate band in the Daily Fee Framework.

6.20 The Scottish Government revises the Framework annually in the light of Senior Salaries Review Body recommendations to the UK Government and the UK Government's decisions for the Senior Civil Service. The new Chairs and Members Daily Fee Framework for 2009-10 is set out below:

Table 3: Chairs & Members Daily Fee Framework 2009-10 (gross daily fees)

6.21 The bands each consist of a minimum, maximum and a ceiling. There are different rates for Chairs and Members reflecting the different levels of responsibility. The pay policy expectation is that a daily fee should lie within the minimum and maximum of the relevant band in the Daily Fee Framework and only exceed the maximum if required to recruit or retain Chairs and Members with the necessary skills, knowledge, experience or calibre for the role they are to undertake. Daily fees should not exceed the ceiling of the relevant Band.

6.22 The daily fee rates in the Framework are considered gross daily fees in that they must include any contribution made by the public body towards any pension (if offered). Furthermore, a daily fee must not be increased to cover the Chair or Member's own contributions to any pension (see also paragraphs 6.33 to 6.35).

6.23 It is usual practice for the daily fee for a Chair to be set at a higher level than the daily fee for Members, in recognition of the additional responsibilities placed upon Chairs. There are no rules as to how high the level of differential between the Chair and Members' daily fees should be. Where there is a Deputy Chair, their daily fee should be somewhere between that for the Chair and Members. Unless the Deputy Chair was required to have specialist skills, then they would fall within the relevant Members band.

6.24 When a new public body is being established, the Sponsor Team must discuss with the Finance Pay Policy team which of the bands in the Daily Fee Framework might be appropriate for the body. You must then seek approval from the Scottish Government Remuneration Group to the allocation of this band. The same process must be followed if a case is being made to move a public body to a different band in the Daily Fee Framework.

6.25 Clarification on the banding of a public body or which band applies to the Chair, Deputy Chair or Members can be sought from the Finance Pay Policy team who will be able to advise.

What do you need to do to determine the daily fee of a Chair or Member of a public body?

6.26 It is open to the Sponsor Team to set a level of remuneration below the minimum of the band or decide that no payment should be made, apart from expenses. If it is decided that a daily fee should be paid, Sponsor Teams need to consider the appropriate level for that fee, taking into account the pay policy expectations regarding the Daily Fee Framework. When determining the proposed daily fee, the daily fees paid to Chairs and Members of Scottish public bodies in the same band should be considered in the first instance. Only if it is anticipated that the Chair or Members will be recruited from further afield, should the levels of remuneration offered elsewhere be considered. All proposals should be supported by a business case.

What should a business case contain?

6.27 Proposals for reviewing or setting a daily fee must be supported by a business case which should include:

• the reason for introducing or increasing the daily fee, which should include diversity or recruitment and retention issues;
• the proposed daily fee, taking into account the pay policy expectations around the Daily Fee Framework (minimum, maximum and ceiling of the relevant band);
• the remuneration of Chairs and Members of similar public bodies in Scotland and elsewhere (where relevant);
• (for Chairs) the remuneration of the last occupant of the post;
• (for Members) the remuneration of other Members and the differential with the Chair's daily fee; and
• affordability and sustainability.

6.28 Apart from annual uprates, the daily fees for existing Chairs and Members are not expected to require adjustment during the period of appointment. However, where there are recruitment or retention difficulties, proposals to revise the existing daily fee rates by more than the annual uprate may be put to the Scottish Government Remuneration Group.

What do you do if differences in the daily fee rates between Members arise?

6.29 Where the rates paid to the current Members of a public body differ significantly from those proposed for new appointments, you must take the following action:

Where the proposed rate for new appointments is higher than that for current Members

6.29.1 The level of daily fee for new appointments should not normally be any higher than that for existing appointments. Where the proposed rates for new appointments vary from the rates paid to the current Members of a public body, you should discuss the issue with Finance Pay Policy.

6.29.2 Where a Member is to be re-appointed, the new higher rate should be applied (provided that approval to the revised daily fee has already been obtained).

Where the proposed rate for new appointments is lower than that for current Members

6.29.3 Current Members should retain their existing daily fee rates (and any allowances) on a 'mark time' basis. There should be no annual uplift of daily fees or allowances for those Members until such time as the rates for new Members catch up or the Member's term of office comes to an end.

6.29.4 If a Member is to be reappointed, the new lower rate should apply. Where reappointment is being proposed, the Member affected should be informed fully of any changes in the rate of remuneration at the outset of the reappointment process.

What about allowances and other expenses?

6.30 A number of discretionary additional allowances and expenses may be paid to Chairs and Members. The basic principle in applying any or all of these is that no Chair or Member should be out of pocket as a result of their appointment, provided that any costs incurred are considered reasonable.

6.31 All Chairs and Members are eligible to be reimbursed for the costs of travel and subsistence associated with their public duties. To ensure consistency across public bodies, Chairs' and Members' expenses should be paid at standard Scottish Government Travel and Subsistence rates.

6.32 Please contact the Finance Pay Policy team for advice or clarification of any aspect of allowances and other expenses.

What about offering a pension?

6.33 Given the relatively short terms of appointment, the limited number of days on which appointees actually serve on bodies and the generally non-executive nature of their duties, approval is not usually given to offering pension arrangements to Chairs or Members. However, in exceptional circumstances, pension arrangements may be considered, but the approval of the Scottish Government Remuneration Group must be obtained before proposals are implemented. Any such proposals must be supported by a business case which clearly demonstrates why a pension is necessary.

6.34 Where a pension is offered, it should be made clear that as the individual will normally be exercising an option to devote part of their daily fee to a preserved benefit, the level of daily fee must not be increased simply to cover the individual's resultant pension contributions.

6.35 Where pension arrangements are a matter of past practice, Sponsor Teams and public bodies must not assume this is justification for their continuation. Each case must be reconsidered on its merits prior to each appointment round.

What about other tax matters?

6.36 Responsibility for ensuring compliance with all relevant HM Revenue and Customs requirements concerning any payments made to Chairs and Members lies with the public body itself. Individual Chairs and Members must satisfy themselves as to their own tax liabilities as a result of their appointment.

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