29 May 2009
By David Williams
Top-tier pay in the public sector is inconsistent and generally too low, consultants told an influential Commons committee on May 21.
The public administration select committee was taking evidence from leading recruitment advisers as part of an inquiry into senior executive salaries. The consultants said top executives were generally underpaid.
Former Cabinet Office employment director Christopher Johnson, now UK head of human capital at Mercer, added that there was little consistency in salary levels across the sector.
But some MPs were sceptical that salary inflation and the use of outside advisers were necessary. Labour MP Kelvin Hopkins said consultants and chief executives were ‘all part of a little club using a very small market to lever up a small group of salaries’.
Paul Flynn, another Labour member, put it to the witnesses that their role was parasitic, and that there was no evidence that an ‘explosion’ in salaries had led to better services.
Head-hunter Hamish Davidson pointed out that with public sector contracts, consultants were often paid a flat rate so had no direct interest in pushing up pay levels.
But he added: ‘It’s fair to say they’re parasitic, and that often what we do is move pieces around the jigsaw board. We solve one client’s problem and create another. That’s a fair challenge.’
But he still defended the rising use of consultants: ‘There has been a thinning out of human resources capacity as bureaucracy has been cut back and resource has been pushed to the front line.’
He said head-hunters could reach potential candidates who would not apply for an advertised position.
Peter Boreham, Hay Group’s head of UK executive remuneration, argued that consultants brought in human resources expertise, which is limited in the public sector, along with independence and a broader perspective.
‘I often find pay agreements are quite a long way out of line with what I’d expect to see – that’s because they’re set in a vacuum,’ he added.
Boreham concluded: ‘It’s a perceived shortage of talent that drives salaries up, but some of that is only perceived.’ He also argued for more performance-related pay, including potential deductions as well as bonuses.
However, Hopkins questioned how performance could be measured. ‘My experience is that it is always about cost, not about lives and care.’
