PUBLIC SECTOR
Reaction to the Hutton Fair Pay Review
Here’s a selection of responses to Will Hutton’s Review of Fair Pay in the Public Sector.
Hay Group
www.haygroup.com/uk
Peter Smith, director of public sector consulting, said: “Whilst the principle of linking pay to performance is a good one, the recommendation to introduce a salary earn-back scheme needs considerable further work to make it practical. If the initiative is to work, participants would need to be offered a deal that delivered higher pay in more than 50% of scenarios.”
--> Reward collective not individual performance
“The report places emphasis on rewarding individual performance. This may be necessary but a far more important issue for taxpayers is collective performance: how good is my hospital? How efficient is my council?”
--> All inclusive?
“The report makes a number of specific recommendations covering the civil service and arms length bodies, but these account for barely 10% of the total public sector.”
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Mercer
http://uk.mercer.com/home
Chris Johnson, head of Mercer human capital business, said: “Will Hutton has done a good job at providing a basis for a long overdue political consensus around executive pay in the public sector. We would endorse his recommendations. Delivering effective services to citizens – and within what taxpayers can and are willing to fund – depends, in part, on the quality of public sector senior executives. Fair and sustainable pay plays a key part in attracting, motivating and retaining the talent the public sector needs. Hutton’s proposals on performance and pay, on creating transparency and accountability, and for an enhanced role for the Senior Salaries Review Body, provide the basis for a new contract on senior pay.”
“We welcome Hutton’s move away from naïve concepts such as simple multiples of pay and using the Prime Minister’s salary as a relevant benchmark.“
--> Earn-back pay
Mark Hoble, partner in Mercer’s human capital team and a reward specialist, said: “This is about being more explicit about risk and reward and moving from a perception that bonuses are freebies. It needs to be clear to all that a bonus, or earn-back pay, is a reward for good performance and depends on meeting certain criteria. Contracts need to be watertight to reflect this. If they’re not, it could appear that an employee’s contractual pay is being reduced on performance issues, which could lead to legal challenges.”
--> No arbitrary benchmarks
Hoble said: “This is an important shift, but more will need to be done to make the proposed approach meaningful to the public.”
--> An informed debate on senior pay
Hoble said: “This is a good idea and it is right that there is greater transparency. Taxpayers are the public sector shareholders and, as stakeholders, should have information on pay levels of those running the organisation – just as listed companies are required to disclose the pay of their senior management. However, there is a risk that displaying the pay details of a large part of the public sector may deter good people from working in the sector.”
--> Fair pay across the economy
Hoble said: “Some would argue that asking private companies to publish their top pay to median ratio will be seen by many as irrelevant and a matter for shareholders. However, you have to consider if policies like the minimum wage, or a review of banking pay in light of the financial crisis, would have been adopted if left entirely to market forces. This could be attractive to government given its more interventionist stance on social policy and fairness.”
National Union of Teachers
www.teachers.org.uk
Christine Blower, NUT general secretary, said: "We welcome Hutton's acknowledgement of the importance of the public service ethos, the need for fair reward and his recognition that an organisation's success is the result of the collective efforts of the whole workforce. Hutton is wrong, however, to advocate performance-related pay for senior staff. PRP distorts pay structures, undermining fairness and teamwork by introducing subjective pay decisions that in education would depend on the budgetary position of the school rather than on objective factors."
--> Greater transparency
"The NUT agrees that there needs to be greater transparency when setting pay for all school leaders, to avoid any inconsistencies which may occur. In the light of the government's obsession with pushing forward the academies and Free Schools programme this is a strong argument for maintaining the present national framework for teachers' pay.
--> No arbitrary benchmarks
"Thankfully arbitrary pay caps such as the Prime Minister's salary have been kicked into the long grass. The myth of exorbitant salaries paid to public sector executives is also laid to rest in this report; Hutton makes clear that in the last decade this is a trend more reflective of the private sector. As the coalition government goes further down the route of privatising the public sector this is something they need to take heed of.”
Local Government Association
www.lga.gov.uk
Jan Parkinson, Local Government Employers managing director, said: “The report offers a considered and balanced analysis of public sector pay. The majority of its recommendations reinforce practices already common in local authorities. We absolutely endorse the emphasis on transparency and democratic accountability and support calls for fair and accurate comparisons to be made of the relative remuneration of different roles in the public sector."
“Senior council salaries are already public on local authority web sites and decisions on how much to pay senior staff are made by politically proportionate committees within councils. In addition, workers in local government are subject to regular job evaluation to ensure they are fulfilling their duties and delivering value for money for residents.
“It is important to keep the level of senior council salaries in perspective. Senior staff pay makes up around 2.5% of the total local authority pay bill, while the ratio of average top pay to average lowest pay in local government is 9 to 1. We believe that is a proportionate approach to pay increments in a sector where chief executives are responsible for huge organisations which deliver vital services to every family in Britain."
“In order to improve on their record as the most efficient part of the public sector local authorities need to attract and keep talented people capable of running organisations with budgets of up to £1bn per year. In deciding pay levels they need to balance that with the need for all salaries to be reasonable and transparent."
“We would want to avoid the introduction of a blanket approach to pay and incentives across the entire public sector. There is no one-size-fits-all solution and we believe democratically elected local authorities should retain the flexibility to set remuneration and performance incentives which are appropriate to them."
”We believe the introduction of a senior salary code of practice for the sector will help better explain the decision making process to tax-payers. The call on the Senior Salaries Review Body to make definitive comparisons between private and public sector pay will also help challenge the common misconception that senior council salaries are in the same hemisphere as those in private companies of a similar size.”
Gail Cartmail, Unite's assistant general secretary, said: ”This was a golden opportunity to bring a sense of reality into bosses’ pay in the public sector – but what Will Hutton has come up with is both ineffectual and spineless. This was a great opportunity to inject much needed fairness into the pay of some chief executives in the public sector, which give such a bad image about the public service ethos. However, that opportunity has been squandered and made worse by the biggest earners being excluded from the remit of the review.”
“In its submission to the review, Unite had argued that trade union representatives should have ‘a say’ on how much senior executives are awarded in pay rises. This followed the furore over the vast disparity between what top bosses get paid in the public sector and the lowest paid bringing up families on as little as £13,000 a year.”
“Unite was also critical as to why the review was not investigating the pay in such organisations as the Royal Mail, the BBC and taxpayer-supported nationalised banks, where the government aspiration of a 20:1 ratio between the chief executive and the lowest paid appeared to be exceeded.”
High Pay Commission
http://highpaycommission.co.uk
Deborah Hargreaves, Chair, said: “High pay whether it is executives, bankers or businessmen is now in the public eye. What is clear is that this is predominantly a private sector problem. The share of top percentile earnings taken home in the public sector is declining and now accounts for less than 1% of those on top wages."
“We have seen huge increases in top pay in the private sector. In executive pay in the FTSE 100 for example over the last ten years we have seen a 67% pay increase, while the average employee has seen their pay rise by less than half that. The average top executive in one of these companies now earns over £4 million.”
“There are lots of myths and misconceptions about what has driven top pay. But what is clear is that the government can no longer shirk the issue.”
“Will Hutton’s suggestion of a framework for public sector pay, which the private sector might be expected to follow, may provide the beginnings of a more comprehensive approach. But it is absolutely vital that we extend the discussion beyond the public sector, and have a real debate on high pay in the private sector now. Our Commission is gathering evidence so that we can have such a debate. We need a degree of openness and honesty about what we are rewarding when it comes to pay across the spectrum and what is fair pay in a modern corporate environment.”
Chartered Institute of Personnel and Development
www.cipd.co.uk
Charles Cotton, CIPD reward adviser, said: “We particularly welcome Will Hutton’s robust recommendations that top public sector pay should be better aligned to an assessment of individual and organisational performance. In the current climate the word ‘bonus’ has become a dirty word, but taxpayers will benefit if variable pay is effectively tied to performance measures that can demonstrably improve the delivery of public services.”
--> Performance targets
“We recognise there will be challenges in setting meaningful and stretching performance targets and methods of assessment, but these challenges can be met in a way that ensures pay set in this way does what it is meant to do – which is drive real improvements in performance. In going down this road, it is important to ensure that bonuses are used as an alternative, though complementary, reward tool. They should not simply replicate or replace what is already being rewarded and recognised through pay awards and promotions.”
--> Greater transparency
“Hutton’s focus on transparency is also welcome. A clear explanation of the rationale behind senior pay is important in helping build confidence among taxpayers that their money is being put to good use. Transparency will also help set realistic reward expectations amongst public sector workers.”
“There is a danger, as we noted in our own report, that pay transparency may uncover some ‘nasty’ surprises in some organisations. For example, there may be legacy issues that are no longer justified, and internal inconsistencies resulting from line managers acting to recruit or retain particular individuals. But the short-term cans of worms that pay transparency may open are less important than securing an approach in which reward reflects personal and collective achievements rather than prejudice, bias and managerial weakness.”
--> No arbitrary benchmarks
“We’re pleased to see no reference in the report to the misleading use of the Prime Minister’s salary as a benchmark for other public sector jobs, and also that the report abandons proposals for an arbitrary pay ratio. We need to move the debate on from how much public sector employees earn to what they actually do for this money. Linking pay to performance and explaining the rationale behind top pay will be more effective than headline grabbing approaches to the reporting of pay."