PUBLIC SECTOR PAY
Hay Group sheds new light on public-private pay gap
The public-private pay gap has been reversed at “operative” levels, with salaries in the public sector rising by 13 percentage points more than their private sector counterparts over the last decade, according to Hay Group’s latest PayNet UK Salary Tracker.
But the data reveals “disproportionate senior salary rises in the public sector to be a myth”. Senior managers in private firms still earn significantly more than their public sector colleagues. What’s more, Hay Group concludes: “As government spending cuts and calls for pay restraint begin to hit, public sector pay will plateau, whilst private salaries are set to climb.”
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Background
Hay Group’s PayNet UK Salary Tracker analyses pay and salary movements in as many as 600 organisations, representing over one million employees. Data is analysed across five employee levels. For the purposes of this study the main three are mentioned only:
Representative employees from the “operative/clerk” level include, but are not limited to, receptionist, accounting clerk, data entry operative roles.
Representative employees from the “professional” level include, but are not limited to, social care co-ordinator, accountant, engineer and highways officer.
The “senior manager” level represents director level positions.
The PayNet UK Salary Tracker does not include senior executive roles at large private and public sector organisations such as chief executive and chief financial officers. Unless otherwise indicated, all salaries quoted represent “total cash” amounts, including: basic salaries, regional allowances, fixed payments and short-term variable payments such as bonuses that are contingent on discretion, performance or results achieved.
Tipping the scale
For operative staff, the key figures are these:
Public pay at operative level has increased by 50% over ten years, with staff now earning £695 more a year on average than those in private firms.
In the private sector, the equivalent rise has been a 37% increase, with operative salaries holding firm or decreasing since 2009, as the recession hit.
Operative staff in the public sector now earn £18,027 on average, compared with £12,035 in 2000.
Private sector equivalent wages average £17,332, up from £12,652 in 2000.
David Smith, reward information consultant at Hay Group, said: “The public sector was not directly affected by the global economic downturn, unlike the private sector. But with government austerity taking hold, many employees are beginning to feel the impact of cost cutting in their wallets."
Mind the gap
Higher up the pay scale, the statistics are as follows:
When including bonuses, senior management in the private sector earn £57,000 more a year on average than their public sector counterparts – a “consistent difference of over 60% since 2000,” says Hay Group.
The average pay (including bonuses) for a senior manager in the public sector is £118,673, compared with £176,498 in the private sector.
In terms of base salary, private sector senior managers still earn almost £24,000 more a year on average than the equivalent role in the public sector.
State of pay
Contrary to popular belief, according to Hay Group, for senior management in both public and private sectors, total percentage increases over the last ten years “have been identical – challenging the view that public sector managers have enjoyed disproportionate wage boosts”.
In 2000, public sector senior managers earned £73,773 on average, compared with £108,835 in private organisations.
By 2005, this had risen by 33% in both sectors, followed by a further 21% increase in the last six years.
Senior public sector managers now earn £118,673, compared with £176,498 for the equivalent role in the private sector.
Smith said: “Our data shows that the media furore over public pay is unfounded, with percentage rises at senior management level identical to those in the private sector. Public sector managers should arm themselves with reliable and robust figures, particularly around the value of the total package, to help support their decisions about pay in the public domain.”
What’s next?
Hay Group forecasts that pay in the private sector will rise by approximately 6% over the next two years. In the public sector, the equivalent role will see increases considerably below the current rate of inflation, at just 3%.
A final word
“The government’s austerity programme, stuttering economic recovery and calls for restraint will all have a tangible impact on the pay divide. With pay restraint taking hold in the public sector and pensions set to become a less valuable benefit, we predict that the salary gap will start to widen at all levels in the next couple of years. In these tough times, the challenge for the public sector will be to contain costs yet still be able to attract and retain key talent.” - David Smith, reward information consultant at Hay Group.
Want to know more?
Title: PayNet UK Salary Tracker, Hay Group, October 2011.
Availability: Visit www.haygroup.com/uk/services/index.aspx?ID=29836 for graphs showing public-private pay gap, as well as key economic indicators such as CPI, RPI and Bank of England interest rates. For more information, tel: +44 (0) 207 856 7200, email: GB_reward_information@haygroup.com.
Hay Group is a “global management consulting firm that works with leaders to transform strategy into reality”. It has over 2,600 employees working in 85 offices in 47 countries. To find out more visit www.haygroup.com/uk.