The government should look to Spain’s example and consider across-the-board cuts to public sector pay as it prepares to tackle the £156bn budget deficit.
That was the radical message from leading HR directors in the same week the Chartered Institute of Personnel and Development (CIPD) warned that 725,000 public sector jobs could now be axed by 2015 – a 45% increase on its original forecasts.
Last month, Spain announced it would slash pay for government staff by an average of 5%, and 15% for ministers, sparking a one-day strike by civil servants this week.
A number of private sector employers, including JCB, Toyota and Honda, successfully cut salaries by up to 15% during the recession to reduce their overheads and limit redundancies.
Richard Crouch, head of HR and organisational development at Somerset County Council – and a member of Personnel Today’s HR Austerity Panel – said: “It is probably right for society as a whole to accept some pain to support the re-booting of the economy. This should be via short to medium-term measures rather than long-term. So, cuts in pay of say 5% as Spain has done ought to be considered.”
But Crouch added these cut should not affect those earning under £18,000.
Jim Savege, HR director at Cumbria County Council, said a pay cut along the lines of that imposed in Spain “is something a number of organisations in the public sector may wish to consider”.
“I would think it would be best done as a temporary change rather than a permanent one, and be linked to the financial climate and some form of national indicators to trigger the return to previous levels,” he added.
Dean Shoesmith, president of the Public Sector People Managers’ Association, agreed “an across-the-board pay cut is one means of reducing public sector spend”, but warned it could have repercussions on recruitment and retention, particularly for hard-to-fill vacancies.
John Philpott, chief economist at the CIPD, said cutting pay could be a “useful means of cutting costs”, but added it would not be an alternative to job losses.
However, Graham White, HR director at Westminster Council, insisted public sector pay cuts were “not a credible solution”.
“It may make a small dent in the current recessionary overdraft, but it will do little to solve the real underlying problems of recession and will create a deep-rooted sense of distrust and panic that will take many years to remove,” he said.
Stephen Moir, director of people, policy and law at Cambridgeshire County Council, agreed, stressing the already-planned pay freeze for public servants “will actually amount to a real-term pay cut for many people” due to high inflation and potential VAT increases.
Meanwhile, Dave Prentis, general secretary of public sector union Unison, told Personnel Today that “HR directors ought to know better”. “They ought to know how demoralising it is for a workforce to be told they have to do the same job for less pay,” he said.
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