Public sector pay shake-up required for setting executive reward

Christopher Johnson, head of human capital for HR consultancy Mercer, believes the current piecemeal approach needs to change if the sector is to avoid accusations of fat-cat pay.

Executive reward in the public sector is currently set and monitored through different mechanisms such as pay review bodies, remuneration committees, management processes and political decisions.

But Johnson, who was a Cabinet Office director with responsibility for employee relations and reward across the Civil Service from 2005-08, has called for an independent pay body to advise on reward principles.

He believes executive pay decisions should be made through remuneration committees made up of independent members, while executive reward statements should be published in annual reports similar to those made by public companies.

Growing talent

Johnson told Personnel Today: “There is a lot of debate about fat cats in the public sector. It’s important that public sector pay is set at a level which enables the public sector to grow its own talent and to attract and retain talent.

“High level guidance, the use of remuneration committees and publication of pay in annual reports [means] you can demonstrate that people aren’t just paying themselves handsomely. You can show what the facts are.”

He added that current reward structures do not produce the right results and have a negative effect on leadership, professional expertise, effectiveness of senior management and the performance of public organisations.

In addition, he said, the cost of employing public sector talent is low compared with the private sector.

Local decision-making

Gill Hibberd, president of the Public Sector People Managers’ Association, agreed with Johnson’s recommendations, but stressed that pay decisions should still be made locally.

“To have a set of guiding principles would be helpful and useful as long as that is just what they are – guiding principles,” she told Personnel Today.

“I don’t see a problem in having independent advice, but that is all it should be. Decisions on executive pay are linked to local issues so [decisions] should be made at local level.

Hibberd backed the suggestion about publishing reward statements in annual reports. “This is the public sector. We are all accountable and [the public] has a right to know,” she said.

Current structures

At present, the levels of salaries and performance-related pay awards for the senior civil service are based on recommendations from the Senior Salaries Review Body, an independent committee which reports each year.

The SSRB also sets pay for ministers, senior military officials, judges and very senior NHS managers; however it does not represent local government.

Jonathan Baume, general secretary of the FDA, a union representing senior managers and professionals in public service, supported Johnson’s recommendations. “The FDA has supported calls for greater transparency about senior pay across the public sector.

“We would support a move to establish similar principles in local government and elsewhere in the public sector. This should help rebuild the trust of taxpayers in the public service, which has undoubtedly suffered following the scandal surrounding MP’s allowances.

“Taxpayers will increasingly demand such transparency and the extension of the remit of pay review bodies into the wider public sector at senior levels will be a helpful development.”

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