As election fever grips the British public, or at least the press, it’s a case of another week, another public sector senior manager pay ‘scandal’. This weekend it was The Observer railing against ‘scandalous’ bonuses for senior NHS managers of c£20,000, which the proverbial banker probably wouldn’t get out of bed for. One deputy chief executive received £32,000 after earning more that £1m in consulting income for her trust, which seems a pretty fair return to me.
But these bonuses were cited as key evidence of the wisdom of all three main parties’ pledges to ‘slash NHS management and bureaucracy’ and to protect ‘frontline’ professionals from cuts. Didn’t anyone tell them that performance-related and variable pay is a cornerstone of government pay policy?
But that’s not to say there aren’t serious issues with determining pay for senior managers across the public sector. Amid all of the pre-election hype, it was easy to miss an interim report on this subject published by the Senior Salaries Review Body last month, after the prime minister invited them just before Christmas to carry out a review (SSRB: Initial report on public sector senior remuneration 2010, report No. 74).
The report skilfully dissects the popular impressions with some salient facts and makes a number of cogent recommendations to improve the current ‘inconsistent’ situation, characterised by highly variable pay levels, remuneration practices and governance and reporting procedures.
The SSRB note that senior pay is a significant item of public sector expenditure and the public is therefore right to expect efficient management of it. It found that around 5,500 people across the public sector earn more than £150,000pa, which sounds a lot, although a similar number of bankers will have bonus earnings of over £1m this year.
And which part of the public sector has the most of these ‘fat cat bureaucrats’? Well yes, it is the NHS, but the largest group by far, of around 4,900 people, is in fact ‘frontline’ consultant medical staff. For senior managerial posts, the SSRB find that ‘in general, people in the public sector who are paid at these levels are carrying out highly responsible jobs, often delivering vital public services’.
But to address the inconsistencies that undoubtedly exist, the SSRB makes two highly sensible recommendations. First, it proposes the adoption of a code of practice for senior pay in the public sector, mirroring the Higgs code for the private sector. This code would ‘set out clearly and unambiguously for the whole public sector the principles and standards that are required’. The first draft of the principles enshrined in the code covers three areas:
- remuneration practices, which should provide value for money, be based on the concept of total reward, and incorporate payment for performance;
- independent governance arrangements based on a clearly defined pay framework of decision making, which definitely is not the case in parts of the public sector at present; and
- appropriate disclosure and audit procedures, which again are highly variable across the sector at present.
Second, as already is in place for senior managers in the NHS, the SSRB recommends that a sector-wide reference set of pay ranges are developed for senior jobs to provide more structure and order to the current situation. This would not be a return to centralised pay determination across government, but rather an attempt to combine the benefits of local pay setting, such as flexibility, with the gains from a sector-wide approach, such as talent management and pay co-ordination.
Rather than attempting to score cheap political points at the expense of generally hard-working senior public sector staff that are paid, in many cases, well below their private sector counterparts, whichever party or combination of them wins this election, they would do well to support and implement the SSRB’s proposals.
Duncan Brown is director of HR business development at the Institute for Employment Studies
