HR can change the face of public spending, says TaxPayers’ Alliance

Jonathan Isaby, CEO of the TaxPayers' Alliance. Ken McKay/REX

Jonathan Isaby, CEO of the TaxPayers’ Alliance (TPA), wants to see an end to excessive public-sector payoffs. HR can deliver better value for money for the public purse, he claims.

Face to face, it is difficult to imagine how this quiet, sometimes barely audible CEO is the man who sends shivers up the spines of civil servants.

As boss of the TPA, Jonathan Isaby is never [“depressingly”, he whispers], too far from the headlines. Since taking the post in 2012, he has, unintentionally perhaps, become master of the one- or two-word withering put-down.

“Simply ludicrous,” was his judgment on Whitehall departmental waste (totalling £5 billion, including £4 million spent on inventory for Sea King helicopters no longer in use, and £6 million on soldiers’ ear-plugs found to be not fit for purpose).

Meanwhile, “beggars belief” was his incredulous reaction to the 100 foreign trips, at £100,000 apiece, made by NHS bosses to recruit nurses.

The public-sector HRD’s view

“HR professionals across the whole of the public sector work extremely closely with their colleagues to ensure public money is used wisely, especially in the face of major service transformation and budget pressures.

“Experienced, skilled workers are sometimes made redundant, because their specific role is no longer needed, and this is entirely appropriate.

“However, on rare occasions those same individuals will be brought back in at a later date to fulfil a specific task for a fixed period, and often on part-time hours.

“There is no guarantee of full-time or comparable work and for the organisation it can provide much needed short-term flexibility or specialist skills.”

Louise TibbertHead of HR & OD, Hertfordshire County Council

But more recently, it is not stories of isolated mis-management that have attracted his ire.

For years, the TPA has banged the drum of what it believes is excessive public-sector pay, thanks to its annual Town Hall Rich Lists. But now Isaby argues there is an even bigger scandal – one that he believes is squarely the HRD’s fault. This is the practice of huge (and unnecessary, he believes) payoffs to public-sector officials.

Revolving doors

Worse than excessive payoffs, Isaby says, is the increasing trend for bodies to simply rehire people again at more expensive contractor-level rates. If HR doesn’t reform itself, he says, this is only going to get worse after the election, as further public-sector cuts begin to take effect.

“The ‘revolving door’ – being got rid of on Friday, then turning up on a big fat juicy day rate on Monday, is absolutely impossible to justify,” says Isaby. “When tax money is seized the way it is, there is an awesome responsibility for it to be spent properly.

“My gut feeling is that HRDs have forgotten where money comes from. They spend it like it’s not their own. They’ve lost touch.”

Evidence suggests that this is more than a gut feeling. At the start of the year, an investigation by The Times revealed that since 2010, councils have spent £5 billion on consultants and agency staff, many of whom were former employees.

Five councils spent more than £100 million on agency staff in 2010-11 alone. In late 2014, Brentwood Borough Council was exposed for rehiring three people it had already paid redundancy payments to (one got nearly £25,000), at a new cost of £75,713.

Further abuses include councils paying staff additional “gagging money” – compromise agreements that prevent them from saying what their redundancy terms actually are (since 2009 Camden Council has reportedly paid an average of £8,000 each in these agreements), or paying redundancy to those who had already announced they were retiring.

But it is HR departments giving staff above statutory redundancy terms (one “non-senior” employee at Derby Council was paid £180,000 to leave last year) and/or rehiring them soon after that most deeply concerns him.

Value for money?

“This is how countless millions of pounds are being misspent,” Isaby says. “Sure, HR departments have jobs to do, but their primary focus should be delivering tax payer value for money.”

One of the arguments for enhanced payoffs is that it is “worth it” if it means a swift departure, avoiding disruption and potential employment tribunals.

This was the line that former BBC HRD Lucy Adams took when hauled before the Public Accounts Committee two years ago, after being accused of excessive payouts to exiting BBC staff.

But this has no truck with Isaby: “I hear HR folk say they have no choice, but surely it’s up to them to set better contracts in the first place,” he says. “I actually challenge HR to be more accountable in the way it draws up contracts, and the way it decides payouts.

“Whether it will though, I don’t know. What’s certain is that the public sector is hugely bloated still, and when the next wave of post-election cuts happen, it won’t be acceptable if HR professionals continue to use public money for payoffs like it’s Monopoly money.”

According to Isaby, there needs to be a change in mindset among public-sector HR chiefs. “I think it requires real leadership, and stepping out of the sidelines, but it’s possible.” When Hammersmith & Fulham and Chelsea & Kensington announced plans to become a super council, all recruitment and payoff decisions had to be rubber-stamped by the CEO. There’s no reason HR directors shouldn’t be doing this.”

Pay-off pressure

Acknowledgement that a huge “compensation culture” problem exists does not just come from the TPA.

The employee relations consultant’s view

“No matter how unpleasant this essential HR process of letting people go is, there’s a big difference between doing this ‘professionally’ (what I see happen occasionally, but not often enough), and doing this with the interests of the business at heart.

“I’m afraid to say there is an almost universal failure among HR to do managed exits properly.

“In our still fiscally constrained times, where it’s never been more important to get managed exits right, these sorts of large payouts should not be happening.

“HR professionals want to be seen as commercial ‘business partners’, but by their own actions they don’t operate as if they are one, or that they are partners to the business. If they did, they’d be controlling the negotiating position far better than they currently do.”

Josh Sunsoa, founder, Sunsoa & Co

Last year, the Public Accounts Committee criticised all forms of “compromise agreements and special severance payments to terminate employment contracts in the public sector”, saying that a “lack of transparency, oversight and proper accountability over their use has allowed taxpayers’ money to be used to reward failure”.

At the start of 2015, David Cameron pledged that, should he win the general election, controversial six-figure “golden goodbyes” (such as the £280,000 given to Pembrokeshire Council’s CEO last autumn – cut from a proposed £330,000 after public outcry) would be banned.

Payoffs, he said, would be capped at £95,000 for all staff working in the NHS, civil service, councils and the BBC.

Will the cap work?

According to Isaby, this is tinkering around the edges. “The principle of having a cap is right, but not only is it too high, the challenge will remain as to whether HR enforces it.

“My worry is that if you set a limit at £95,000, then that’s what a default top payout will be, even though it might not have needed to be this. HR professionals need to have much greater sense of why the money they dish out is the level it is.”

He points to the example of Hampshire County Council, which spent £27 million of taxpayers’ money on redundancies in 2012. Some 83 staff received between £40,000 and £66,000 while the average payout for the other 868 employees who lost their jobs was £20,589 – twice as high as in the private sector.

Under legal statutory redundancy guidelines a manager aged 50 on a £75,000 salary who worked at the council for 15 years should get £7,800. But under Hampshire’s compulsory scheme it was £28,000, and under enhanced terms some could have left pocketing £56,000.

“Whoever wins the election, the same problem will face public-sector HR professionals,” Isaby concludes.

“It’s how to manage redundancy and rehiring practices, and do it without being lazy and reverting to type. I really do hope HR professionals up their game.”

If they don’t, prepare to be at the receiving end of more of those famous withering retorts.

Peter Crush

About Peter Crush

Peter Crush is an award-winning HR journalist who writes for daily newspapers including The Guardian and the Evening Standard, as well as HR and business journals.

4 Responses to HR can change the face of public spending, says TaxPayers’ Alliance

  1. Theo Blackwell 22 Apr 2015 at 1:35 pm #

    Usual rubbish from the Taxpayer’s Alliance, I’m surprised you take them seriously. Certainly their revelations and calls for transparency would carry more weight if they revealed the shadowy right wing ‘tax efficient’ funders who have bankrolled them in the past. FYI Camden doesn’t use ‘gagging’ clauses, in common with other councils it uses settlement agreements – the TPA have just lifted this from the internet.

    • B Profane 23 Apr 2015 at 11:50 am #

      I’m not quite sure what you are referring to as ‘rubbish’. You might not like the Tax Payers’ alliance, but the examples and figures quoted are real. The BBC examples were phenomenal and came under fire from all corners. The fire and rehire culture is similarly irksome.

      As for the claim that Camden doesn’t use non-disclosure agreements – this is counter to the figures provided following a written question asked by Cllr Flick Rea, Lib Dem representative for Fortune Green. The Councillor’s figures showed that, since 2009, 392 staff leaving council were paid an average of £8,000 to sign compromise agreements. To suggest that there is a difference between ‘gagging clauses’ and non-disclosure agreements is ridiculous local government double-speak of the highest order.

      • Robin Hall 24 Apr 2015 at 5:18 pm #

        Compromise/Settlement Agreements are commonplace in both the public and private sector and most commonly used where redundancies are taking place. It is quite likely that the majority of these settlements were redundancy arrangements.

        Gagging clauses, as the press like to call them, are simply confidentiality arrangements used in settlement agreements. There is nothing clandestine about them and again they are ‘very’ widely used in the private sector so certainly not local government double-speak.

  2. Robin Hall 24 Apr 2015 at 4:35 pm #

    As with all organisations it is critical to understand the over-arching agenda. TPA are part of a broad ‘right-wing’ campaign to demonise public spending in the hope of garnering support for further public spending cuts. That he should suggest that he finds the media attention depressing is disingenuous since maintaining media focus on public spending is what matters most to him.

    On the specific point concerning a role for HR to help contain spending in public organisations I would suggest that all employees of all organisations (be they public or private) should have due regard for the financial efficiency of the organisations they work for. HR do have oversight of contractual commitments between employees and employers but, far more often than not, it is the competition for talent that determines the specific contractual arrangements that are made with certain individuals and, since the public sector recruits from the same pool of talent as the private sector, it is in fact the same free market principles (that I would fully expect Mr Isaby to endorse) that result in the financial separation arrangements that he is complaining about.

    Would Mr Isaby therefore prefer that the public sector doesn’t take advantage of the best talent the private sector has to offer or would he prefer that we place limitations on the free market for talent across both sectors so as to prevent these arrangements taking place anywhere (It is worth reflecting on the recent £12 million golden hello paid to a certain Helge Lund for his 3 months of activity at BG – something that I imagine BG consumers will end up paying for)

    I imagine the solution is probably irrelevant to Mr Isaby since his only real goal is to demonise public spending and any amount of publicity he can get does the job nicely.