Equal pay for council workers: whose bill is it anyway?

Unless you have been living on the moon for the past year, you cannot fail to have read or heard about the equal pay crisis in local government.

Local authorities have just four days left to implement the single status agreement - despite having had 10 years to sort the issue out.

The deal sought to end an unfair pay system that favoured male workers by ensuring employers implemented a common pay scale for all jobs, and harmonised terms and conditions based on equal pay and equal status for part-time staff.

But more than two-thirds of the 410 local authorities in England and Wales will miss the deadline, according to the Local Government Employers (LGE) body. Costs could escalate to £5bn in back-pay liabilities and future wage bills.

Jan Parkinson, managing director of LGE, said the recent horror stories about massive equal pay debts had not spurred councils into action.

“Most councils are still not going to meet the deadline and we haven’t seen any major changes,” she told Personnel Today.

Epic crisis

Brian Strutton, national secretary of public services at the GMB union, which represents thousands of council workers, described the situation as horrendous.

He said: “This is a crisis of epic proportions. There are tens of thousands of equal pay cases running, and there is complete paralysis among local authorities.”

So why has there been such apathy about resolving this issue when such vast sums of money are involved?

Stephen Moir, director of people and policy at Cambridgeshire County Council, and lead on pay and workforce strategy for the Public Sector People Managers’ Association, said poor funding, lack of understanding and the late setting of a timescale were the main causes of the delay.

“The original 1997 [single status] agreement did not set a timescale by which the pay and grading reviews had to be completed. This came later in the 2004 national agreement,” Moir said.

“Local authorities were not really being challenged about equal pay issues and, in many cases, did not understand that they had a problem with equality of pay. But the legal landscape has now completely changed.”

Strutton said the fact that councillors only served for a finite amount of time (four years) meant the buck kept being passed, with no-one taking responsibility.

But Graham White, head of HR at Surrey County Council, said there was no excuse for the apparent indifference.

“Like a few other councils we anticipated the national single status agreement, and in 1997 we were already well advanced with the unions locally on an ‘in principle’ agreement for harmonisation and single status. I am unclear why so many have not followed this approach,” he said.

However, councils have insisted they are not solely to blame for the crisis. The consensus is that the government has done little to assuage concerns about equal pay - or offer much in the way of financial assistance.

Borrowing requirement

LGE has suggested the government should allow councils to borrow against their assets over a period of several years - a process known as capitalisation. But the Treasury said bids to capitalise back-pay settlements would be subject to an overall cap of £200m. The department has already received applications exceeding £320m.

When you consider that six regions have more than £200m each to shell out on back pay, before accounting for the cost of new pay structures, the fund is barely a drop in the ocean.

Parkinson said she was disappointed with the government’s stance, and Moir described the position as singularly unhelpful.

“Ministerial comments about this being a local government issue do not help anyone, not least the HR professional trying to convince their councillors that single status and equal pay are not only the right thing to do legally, but morally as well,” Moir added.

Strutton echoed this sentiment. “[The union] has been raising this issue with the government over the past four years, but ministers have chosen to wash their hands of it completely.

“[The government] is going to have to relax its rules about capitalisation and allow councils to spread the costs,” he said.

Government’s response

But a spokesman for the Department of Communities and Local Government denied that central government should be doing more.

“Local government agreed a timetable with the unions for introducing pay and grading reviews. This was not imposed by central government and allowed them to take account of affordability constraints,” he said.

The government is considering a range of options to help increase authorities’ flexibility to manage their own equal pay pressures, the spokesman added.

But costs have to come from somewhere; it seems inevitable that the taxpayer will foot the bill as councils have no choice but to increase rates. Moir said money would have to be taken from frontline public services and councils would have to sell off assets to meet their liabilities.

One council is taking a particularly robust stance in the face of about 1,000 equal pay claims. Northumberland County Council has decided to challenge its workersÍ claims in court.

Cash crisis: Regional breakdown of equal pay liabilities

Scotland – £560m: Scotland’s 32 councils told the Scottish parliament they faced up to £560m in compensation and back pay last week. The councils have called on the Scottish Executive to help meet spiralling costs. In some councils, compensation deals have already been reached. Glasgow has spent an estimated £7m in North Lanarkshire the bill was a reported £23m while in Fife it cost £8m. The Convention for Scottish Local Authorities said local government was not in a “strong position” to be able to deal with the extra costs.

North East – £300m: Equal pay liabilities in the North East have been well documented over the past few years. Newcastle City Council has already spent about £17m in equal pay costs. Last week, the council said it expected to fork out another £5.6m to complete the process. Sunderland County Council has spent a reported £15m, followed by North Tyneside with an estimated £13m, and Durham County Council at £12m.

Yorkshire & Humberside – £371m: Local Government Employers has estimated that Yorkshire & Humberside would have to fork out £371m in equal pay costs. The employers’ body for the region said nine out of 22 councils had implemented the single status agreement, two had partially completed, and 11 councils were expecting to implement in 2008.

North West – £740m: Local Government Employers has put the total cost of liabilities for the North West region at a massive £740m. Cumbria County Council has an estimated £50m to fork out. Bolton Council also had to borrow about £8m but managed to reach an out-of-court settlement with most of the staff involved.

West Midlands – £928m: The West Midlands is the worst area to be hit by equal pay liabilities, with a staggering record £928m for the region’s 38 local authorities in estimated costs. Birmingham City Council warned that an equal pay deal could reach £200m in legal costs, wage rises and back pay. Coventry City Council estimated that its total costs could reach almost £11m. Colin Williams, director of local government services at West Midlands Local Government Association, told Personnel Today that 50% of councils had completed their equal pay review and a further 25% were “well on the way to complete in the near future”.

East Midlands – £83m: The local government body for East Midlands could not confirm Local Government Employers’ estimate of £83m in liabilities. Leicestershire County Council lost a high-profile employment tribunal over equal pay to public sector union Unison in 2005, with the council ordered to impose a new pay system. The council estimated the cost in back pay and new wage structures could reach £8m.

Wales – £300m: The Welsh Local Government Association said councils were committed to tackling the issue of equal pay but warned that it could reach £300m. Chief executive Steve Thomas said big capital programmes, such as the building of schools or road repairs, might have to go on the backburner to meet the cost of liabilities.

East of England – £18m: The East of England Regional Assembly said that nine councils had introduced single status and 18 had been “slightly hampered”.

London – £200m: A spokesman for London Councils said: “At least nine London councils have implemented deals, 18 are in the process of doing so, and five councils have yet to reach a deal. The cost is variable, but the worst case scenario could see London councils paying out £200m in back pay and wage costs.”

South West – £100m: The estimated total liabilities for the South West region could reach £100m, but South West Provincial Employers could not confirm this figure. A spokesman said: “Twenty two of the South West region’s 51 local authorities have successfully implemented a pay and grading review. A further 24 anticipate having completed this exercise by August 2007. As with the rest of the country, the financial implications associated with implementation of revised pay structures are significant.”

South East – £35m: Local Government Employers estimated the South East region faced a total of £35m in liabilities, but South East Employers refused to confirm this figure, or provide any details on which councils had implemented the single status programme.

Timeline

  • 1997 National Joint Council (NJC) of employers and unions devise the single status agreement to end pay discrimination.
  • 2004 NJC sets the timetable for the completion and implementation of pay and grading reviews to be completed by 31 March 2007.
  • 2006 The Treasury announces it will set a national capitalisation fund for local government liability costs on single status agreements, with a cap of £200m.
  • 2007 Councils have until 31 March to implement single status deals. More than two-thirds of councils are expected to miss the deadline.

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