PUBLIC SECTOR
Focus on public sector pay
UK public services employ over 1.1 million employees and, as a result, pay deals in the sector send strong signals to the rest of the economy as well as having important consequences for inflation and the government’s borrowing requirement. A recent report from Incomes Data Services helps shed light on the current reward landscape in all areas of the public services as well as providing a detailed discussion of government policy on pay and prospects for the 2008 bargaining round.
%ADVERT%
One of the main points made by the report, pertinent to all sections of the public sector, is that 2008 looks set to be a challenging year as the government’s tight policy on pay bears down on the level of wage offers and makes talks over pay reviews even lengthier. One reason for this is that all “significant pay decisions” need to be signed off by the government’s Public Sector Pay Committee, a body dubbed the “pay gateway”, made up of senior staff from the lead departments of the Treasury and Cabinet Office. As a result the report states, decisions following Public Sector Review Body recommendations are being delayed as the pay committee spends time scrutinising the various recommendations.
CPI versus RPI
One criticism of the government’s approach is that it wishes to base its approach on the Consumer Prices Index (CPI) rather than the generally higher Retail Prices Index (RPI).
The CPI is a measure of inflation which is almost never used for pay negotiations in the private sector because it excludes key elements of expenditure such as council tax and housing costs, including mortgage interest payments.
In contrast, inflation, measured on the all-items RPI, averaged 4.3% during 2007, over twice the level of the government’s target for pay rises. However, there has been a slight shift in emphasis away from the letter of the policy, which was for pay increases to be in line with its inflation target of 2%. The new approach was signalled by a call from the prime minister for long-term pay deals in the public sector.
Equal pay
The IDS report also examines a number of the issues currently most pertinent to the public sector and explains that the biggest industrial relations issue at the present time is equal pay. This, it states, is true both now and in the foreseeable future and, as a result, employers have to ensure new pay structures are equal pay-proofed and also meet the cost of claims for back pay.
In central government, for example, equal pay claims are being pursued, both for parity between departments and within them where separate pay structures exist. Similarly, in local government, equality-proofed local pay and grading reviews continue while in the NHS there are currently over 13,700 equal pay claims lodged with employment tribunals.
Recruitment and retention
Another important theme mentioned in the report was recruitment and retention. In particular, there is a concern that the government’s policy on pay may be re-creating previous problems encountered, especially around recruitment.
Pay in areas with a high cost-of-living, principally London and the South East, is back in focus, with additional increases for teachers in the capital, for example. There have also been higher rises to London minimums, based on recruitment and retention problems in this high-cost area.
To tackle these problems, total reward is emerging as an approach that is being promoted by employers in some parts of the public sector. Nevertheless, in as much as it is aimed at helping organisations “win the war for talent”, the report says that it may be undermined by an emphasis on pay restraint and reductions in headcount.
A final word
“The government appeared to have dug itself into something of a hole with repeated statements that pay rises should be in line with its inflation target of 2%, based on the much lower CPI. Long-term deals for public sector workers have been trailed as one solution, but whether these are acceptable will depend on the rises on offer, especially given the gap between public and private sector pay increases. The challenge for negotiators will be how to reconcile government objectives for industrial peace to take them through the next election period and unions’ desire for rises that keep their members’ pay in touch with recent increases in the cost of living.” - Ken Mulkearn, the report’s editor, Incomes Data Services.
Want to know more?
Title: Pay in the Public Services 2008, Incomes Data Services.
Availability: To order a copy of the £295 report visit www.incomesdata.co.uk/report/pps.htm and click on “Buy online”. Alternatively you can call customer services on tel: 0845 600 9355.
Incomes Data Services is the “leading UK information and research service on employment issues”, providing a range of publications for employers, trade unions, government departments and other agencies. To find out more visit www.incomesdata.co.uk.