PUBLIC SECTOR
Local pay determination: myth and reality
HM Treasury’s push to introduce local pay in the public sector is based on a batch of myths, misunderstandings and assertions rather than rational decision-making. The government’s reliance on fictions about how large, multi-site private sector companies set pay is laid bare in a new study by Incomes Data Services. Under the IDS microscope are ten myths about local pay determination in the private and public sectors.
In his autumn statement on 29 November 2011, chancellor of the exchequer George Osborne said:
“Public and private sector organisations compete for employees in different markets across the UK. However, while private sector pay is set in accordance with local labour markets, public sector pay is usually set on a national basis. As a result, in many areas, public sector pay does not reflect local labour market conditions.”
The truth, it seems, is a little more complicated. In fact, as Alastair Hatchett, Head of Pay & HR Services at Incomes Data Services, explains, most large, multi-site private sector companies - among them banks, retailers and telecoms companies – operate national pay structures “not dissimilar to large, multi-site public sector organisations that have national pay structures”. And rather than setting pay “in accordance with local labour markets” (Osborne’s words), in reality operate with perhaps four or five bands or zones within a national framework.
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Hatchett notes that most large public sector bodies have inner London, outer London and South East allowances and in some cases they have London regional pay bands. What’s more, one of the key elements of the modernisation agenda in public sector reward in recent years has been the introduction of greater local pay flexibility.
The government’s plans imply that there is something intrinsically better about decentralisng pay structures down to the local level. But Hatchett reckons such assumptions could be very wide of the mark: “Leading HR professionals in large companies with branches throughout the country would say national pay structures and national pay determination provide simplicity, avoid the costs of duplication, allow better pay bill control, create consistency and avoid poaching and leapfrogging.”
Want to know more?
Title: “Growing number of myths about local pay determination”, by Alastair Hatchett, 17 January 2012.
Availability: You can read the IDS blog at http://idseye.com/2012/01/17/growing-number-of-myths-about-local-pay-determination/.
“IDS is a research organisation dedicated to employment-related areas. We provide original research, analysis and training on pay benchmarking, pay settlements, HR policy and practice, pensions law and practice, and employment law. We publish numerous journals and books, have several subscription web sites, and undertake contract research.” For more information visit www.incomesdata.co.uk.