Pay, perks and payoffs

4 Nov 13
Rob Whiteman

The public sector is often criticised for the salaries and contractual arrangements offered to senior managers. Some criticism can be valid – certainly where redundant staff are quickly re-employed elsewhere – but issues with payoffs are not always so clear cut

Seldom have pay, perks and payoffs been so repeatedly in the news. Recently we’ve seen the NHS being urged to claw back redundancy payments from senior managers who have quickly found new jobs, 340 MPs facing criticism for claiming their energy bills as expenses on their second homes, a media furore over Sharon Shoesmith being awarded over £500,000 for unfair dismissal and the BBC facing censure for the lack of transparency and good governance about large severance deals.

Only this weekend Health Secretary Jeremy Hunt called for a ‘collective reality check’ on the number of posts in NHS bodies earning more than £100,000 and announced plans for a cap to challenge the situation ‘where high pay is normalised’.

However, in contrast to this, a piece of relatively unreported news was the new boss of NHS England, Simon Stevens, turning down 10% of the job’s £211,000 salary to take home £189,000.

We have become used to seeing CEO salaries reduced when posts are advertised and benchmarked against the Prime Minister’s salary of £142,500. Indeed, there are many arguments for officials earning more than the Prime Minster, including attracting the best people in the market. Moreover, the PM’s package also includes Downing Street, Chequers, a resignation earldom and future revenue from memoirs, making it worth more than the headline £142,500.

But I believe many will argue that it is hard to see how any official, whether already in post or a new appointee, needs to be paid more in the current market than the person charged with running the NHS, which by any standards is as big a public sector job as it gets. I may be wrong but £189,000 might be a figure to remember in public sector pay.

The issue of payoffs is more complex. First of all, if someone is dismissed, it is a matter of a remedy in law rather than something discretionary. We have seen this in local government where the criticism of ‘boomerang chief executives’ misses the point that sometimes people have been dismissed for some pretty dubious reasons.

We should, though, have sympathy for the taxpayer on redundancy payments where officials are soon re-engaged.  For the individual officials affected, many would doubtless prefer to avoid the anxiety that results from the public service being a confederation of separate employers with no right to be redeployed or transferred to other organisations. To change this, however, would not afford value for money to the taxpayer either, as change programmes would grind to a halt.

For the NHS, the health secretary is considering capping the salary used in redundancy calculations and clawing back severance payments when staff are re-engaged within one year. Capping the reckonable salary used for redundancy payment would in relative terms only affect a few senior people and, indeed, may be difficult to implement when consideration is given to the fact that some senior staff being made redundant will not necessarily find work again.

Perhaps, therefore, the government should consider something more general and create a system-wide solution rather than single out NHS managers. It does appear fiscally reasonable that on receiving a severance package from the public purse, one either cannot work in the public sector for a defined period or alternatively be offered graduated severance payback system as an alternative during that defined period.

Given that severance packages for the employer are recouped from salary savings within 12-18 months, it seems that a defined period of two or more years would be reasonable.

Finally, though quite reasonably calling for reform of public sector pay and conditions in the media, MPs should also look closer to home and compare their terms and conditions to the rest of the public sector and remember that they are also public servants. Despite recent reform, their culture still appears to have normalised the idea of extraordinary expenses for things that many in the public or any other sector would envy.

Of course we need to see MPs, rich or poor, spending time in London and their constituency. But for consistency it seems more appropriate to compare their salaries, conditions and expenses with other public sector workers, but also to make sure that when they do pronounce reform and restraint upon people in the public sector that they are happy to see that echoed in the decisions about their own pay and expenses.

Rob Whiteman is chief executive of CIPFA

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