Public sector pay: It pays to go your own way

A number of councils have chosen to opt out of the national pay agreement and set their own pay awards each year. Are more set to follow suit?

Public sector pay prompts a range of emotions, from bemusement to indignation, and never more so than during a recession. There is an illogical but widespread belief that public sector staff should be paid less than their private sector peers – the argument usually being ‘my taxes are paying your salary’. So public sector pay awards require a careful balance between reflecting the economy, meeting budgetary requirements, and paying enough to attract and retain good staff.

The national pay agreement for local authorities sets a uniform pay rise each year. Why, then, have so many local councils decided to opt out, and to carry out their own negotiations?

Buckinghamshire County Council is one. “We can determine our own pay increase each year, and consult with the trade unions locally. This means we can adjust it to our local market, and know in advance how much to budget year on year,” says HR director Gillian Hibberd.

Circumstances

But she is quick to point out that councils have to look at their own circumstances, and to work out what is best for them. “For example, it’s much more efficient to have a single point of negotiation on a national basis with the trade unions – it’s more cohesive. So there are pros and cons.”

The opportunity to reflect local economic conditions is one of the main reasons for opting out – and it’s no coincidence that the councils which have opted out are all in the south east or east of England, where the cost of living is higher than the rest of the UK. Jim Savege, corporate director of HR at Cumbria County Council, thinks that southern councils have opted out because “historically they have had to deal with different employment market issues, so it has suited them to have more autonomy”.

Kent County Council opted out in 1990. Employment strategy manager Paul Royel says that opting out has given the council several key advantages, including the ability to broaden its terms and conditions, and greater control over budget management. He also mentions timing. “Having opted out means that we are able to set a deadline to implement a pay award,” he says.

Protracted

This is in contrast to the national pay agreement, which tends to involve protracted negotiations, which may mean that by the time a figure has been agreed, it is no longer reflective of the economy. Royel says numerous other councils have contacted Kent looking for information on the benefits of opting out.

Seanne Giddy, head of personnel and training services at Tandridge District Council in Surrey, echoes Royel’s views on flexibility. Her council opted out in 1989, although it still takes into account the national pay award – in addition to benchmarking against other Surrey councils – when negotiating.

Staff at Tandridge have their predecessors to thank for competitive salaries. “A promise was made then [in 1989] that our pay award would always be higher than the national award,” says Giddy. “And I get that quoted to me every year at the pay negotiations, 20 years on.”

Extra cash

Giddy envisages other councils opting out, especially as local authorities see their financial resources shrink. She also feels that councils will opt out because of the way in which the national agreement was settled last year, when councils had to find extra money, in this case 0.3%, at a later stage – something that is becoming increasingly difficult to do.

None of the councils contacted by Personnel Today had plans to opt back in. If councils are opting out, is there any point in having a national pay strategy? It would seem so, as even those councils who have opted out still think it has a part to play.

Bob Matthews, HR manager, people and payroll services, at Aylesbury Vale District Council, says: “A national pay agreement is a useful mechanism to benchmark against,” a statement Giddy agrees with.

Last year’s national award of 2.75% has only just been agreed, following arbitration. Royel says: “It would not have been wildly unrealistic if it had been implemented in April 2008.” But times have changed, and we are in a recession.

Realistic

Hibberd believes the public sector “should be realistic about the economic environment”, adding: “I’m really disappointed with this arbitration award. It’s totally out of sync with what’s happening in the economy, and does nothing to dispel the fat-cat label that has been attributed to public sector pay in the last few months.”

Bucks staff were awarded 2.25% both last year and this year. The council’s 2009-10 award was agreed in November 2008, when inflation was higher and before the UK officially entered recession, and Hibberd hints that it would have been rather lower – even as low as 0% – if agreed more recently.

She thinks it likely that more councils will opt out of the national agreement. “There’s a danger that they will, especially if we get maverick pay awards like the one just given. People are saying they simply cannot afford it, and the net result in some places is that services will have to be cut to enable authorities to pay for the new award.”

So should the 2009-10 national pay agreement negotiations begin at 0%? Giddy isn’t sure, saying: “Nationally, I think local authorities are struggling, but I think it’s a bit black and white to say it should be 0%.” Matthews feels that a 0% award has the potential of being either “pertinent or counterproductive”.

Perception

Royel is all too aware of the public perception of public sector pay. “The public view is that the national award should be 0%. I feel that it should 1% or less – any higher would be unwise.”

Hibberd calls for pragmatism, pointing out: “There needs to be far more realism [this year] on both sides. I think we also have to realise that we have people who are trying to survive, and contrary to public belief, the average wage in the public sector is not high.”

While Tandridge staff are guaranteed a higher pay rise than is offered under the national pay agreement, those at other councils are very much dependent on the local economy and the financial stability – or otherwise – of their employers. Councils still following the national pay strategy may have to find the money for pay rises that they cannot really afford – and may well have to cut jobs to do so.

The 2009-10 pay agreement looks set to be much lower than the previous year’s deal – council leaders have made an offer of a 0.5% pay rise.

Affordable

Sir Steve Bullock, chairman of the Local Government Association (LGA) HR panel, says: “The key aspect of this offer is to make sure that any pay settlement is affordable to the taxpayer and councils, while at the same time making sure that local government continues to be an attractive place to work.”

But the LGA has warned the pay offer would be withdrawn by 1 June in favour of a pay freeze if unions cannot agree to a negotiated settlement – so the decision is far from made.

Meanwhile, with local government pay rises looking uncertain and inconsistent, other parts of the public sector have been faster off the blocks. In March, the government confirmed that three-year pay awards for NHS staff, teachers and police officers, set in 2008, will still be met in full this year, despite the state of the economy.

Councils that have already opted out of the national pay agreement

South East of England:

  • Ashford
  • Aylesbury Vale
  • Buckinghamshire County Council
  • Canterbury
  • Dartford
  • Dover
  • East Hampshire
  • Elmbridge
  • Epsom & Ewell
  • Fareham
  • Guildford
  • Hampshire County Council
  • Kent County Council
  • Maidstone
  • Mole Valley
  • New Forest
  • Reigate & Banstead
  • Rother
  • Runnymede
  • Shepway
  • South Buckinghamshire
  • South Oxfordshire
  • Spelthorne
  • Surrey County Council
  • Swale
  • Tandridge
  • Test Valley
  • Thanet
  • Tonbridge& Malling
  • Waverley
  • Wealden
  • West Berkshire
  • Woking

East of England:

  • Babergh
  • Breckland
  • Brentwood
  • Broxbourne
  • Colchester
  • Hertsmere
  • Huntingdonshire
  • King’s Lynn and West Norfolk
  • Maldon
  • Mid Bedfordshire

Source: Local Government Association

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