Solving the Whitehall pay puzzle: let civil servants cash in some benefits

Written by Andrew Greenway on 24 August 2017 in Opinion
Opinion

Public sector pay has been in the headlines, but there’s a lack of innovative thinking on changing the reward package across government. It’s time to try more radical solution

'The public sector pay debate is a wonderful example of English hypocrisy at its finest'. Credit: Pixabay

Pay, like sex, is one of those topics avoided in polite conversation. Newspapers then gleefully fill this vacuum with an enthusiasm bordering on hysteria and, as a result, most people tend to feel like they’re getting less than everyone else.

Before the summer break, public sector pay enjoyed a few days in the headlines. It is likely to get more in the autumn. Much like the BBC fun and games, the arguments are likely to focus on salary, how much for whom, and involve much wailing on both sides. That’s a pity. A bigger conversation about how we reward civil servants is long overdue. 

Last July, then Cabinet Office minister Matt Hancock gave a speech on the new civil service workforce plan. This promised a new reward framework for civil servants would appear this April, whatever that means. Events then occurred.


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Since then, the chancellor’s post-election approach – he reportedly said public sector workers are overpaid – reminds me of a story I was recently told by a (private sector) friend. After a busy few months, their colleague was called over by a senior manager.

“Look, we recognise all the extra work you’ve done recently, and really wanted to reward you for that. So we asked our HR team to run a salary benchmarking exercise for your role. Anyway, it turns out we’ve been paying you too much.”

“Mmm, OK. Right. So…you want me to pay the money back?”

“No, no, just wanted you to know.”

“Oh. Thanks?”

“Don’t mention it.”

The public sector pay debate is a wonderful example of English hypocrisy at its finest. It is tactical point scoring led by editors paid several times more than all but a tiny handful of public servants. It is totally predictable, and perfect fodder for tea-point griping. Some of it is justified, most of it is humbug.

What is irritating about this well-practised grumbling is that it obscures a more productive argument. This debate should be about what we want our public sector to look like. Rewarding civil servants rarely comes up in discussions on government effectiveness, and when it does, commentators tend to get stuck on how much cash ostensibly useless people have somehow managed to wheelbarrow off over the horizon. “Pay peanuts and you get monkeys”, then comes the lazy response. Narrow-mindedness abounds.

There are certain accepted truths about the pay and reward trade-offs between public and private sectors. The state will pay you less. However, it will give you longer holidays, more parental leave, a better pension, and ‘stability’. Stability is a euphemistic term. It means you are less likely to be fired or made redundant. True or not, the perception of these trade-offs has endured for such a long time that they are now unquestioned. Almost by definition, a civil servant is someone who values certainty of reward over amount. Every public sector employee is effectively paying to avoid risk. If they are paid too well, they must therefore be having their cake and eating it.

Certain professions in Whitehall – digital in particular – crashed headlong in to these norms as it grew in strength from 2012 onwards. It is tempting to argue that these specialist skills insisted on new rules purely because they are desirable for many employers. The real reason that the digital profession demanded a conversation about pay was because the way of working it espoused rested on a flexible approach to reward. It is an argument that is applicable elsewhere in the public sector.

Most digital teams in government are notorious among their colleagues for having a lot of contractors on their books. As someone who worked on both sides of the civil servant/contractor divide, the tensions are real. As a permanent member of staff, I cursed the generous day rates my peers were getting. Yet after doing the sums, the difference was often minimal if you cashed up the additional civil service benefits. (Though inevitably there were some exceptions being paid way over the odds. Sadly, I failed to get those jobs.)

The real trade-off involved is flexibility versus stability. In effect, one’s appetite for risk. As a contractor I had more options because I could make all the choices over where I put my cash, rather than my employer doing it for me before it ever reached my bank account. But I also had a more precarious career.

Teams made up of people who take different decisions about how to be rewarded are more diverse. Some will be at a stage of life where building up cash for a deposit on a house is the top priority. Others have an eye on maternity leave policy, or the pension pot. There are different appetites for personal and professional risk working together. Mixing these leads to healthier conversations about the right time to be bold, and the right time to hold fire.

In an organisation that has its identity defined by a certain hidebound preference for risk aversion, looking at how the whole civil service is rewarded seems like a good idea. Offering one package of rewards to almost everyone working in central government is almost guaranteed to do two things: be highly attractive for a relatively narrow band of people who will resist any alteration to it, and frustrate everyone else to the point of leaving.

The right answer is not just to change the offer through pay rises, though there are plenty of good reasons for looking at these too. Nor is it to move Whitehall to an Uber-like model, where civil servants have no choice but to be hyper-flexible. The goal should be to give civil servants more autonomy in picking how they are rewarded, and allow them to change that mix as their careers evolve. Trust employees to make their own decisions.

I’m not saying this is politically straightforward. Having made workplace pensions mandatory for all employers, turning around and saying that these are potentially optional for the government is not going to be popular. I would also expect much internal huffing about the administrative headaches caused by permitting such flexibility for an organisation of 400,000 employees.

So, here’s a suggestion – start with the Fast Stream. Faststreamers have been paid roughly the same starting salary (£27,500) for several years now, along with the usual package of pension, holiday and so on. Rather than finding more money, which is politically tricky, make every bit of their reward package that isn’t the statutory minimum into a cashable option. Lay out a menu, set a maximum holiday limit, and see what they pick. Don’t nudge them into defaulting to the usual options. They’re smart people; that’s why you’ve hired them. Then try it with a small department. Then another. Then three more.

The biggest risk for the civil service in the digital age is that it continues to hire the same people, and teaches them how to play the same game. Giving people more choice over how they are rewarded is a radical and cheap way of changing the rules and the players. That’s a bigger prize than seeing off complaints about who’s paid more than the prime minister.

About the author

Andrew Greenway is a former deputy director of data analysis and horizon scanning at the Government Office for Science, and a programme manager working on digital projects for the Cabinet Office. He now works as an independent consultant.

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Comments

William (MOD) (not verified)

Submitted on 24 August, 2017 - 09:39
Andrew, An interesting and, in the main, balanced article. However, I must take you to task on a few points you made. On, “It means you are less likely to be fired or made redundant” - Is that including the staff cuts already taken and the 30% downsizing of the Civil Servants by 2020? “Giving people more choice over how they are rewarded” is all very “politically nice and easy” to say rewards without pay rises– but if you cannot afford to pay your bills because your civil service pay has not increased since 2010 (I can show you the figures!), you will look elsewhere and accept terms and conditions with fewer holidays. E.g. - inflation 2.9%; rail fares 3.6%, council tax >5%, Most Civil Servants pay rise - less than 1% You said that a fast-streamer salary has stayed constant at £27500 – what you didn’t mention is that the deductions from pension contributions have increased by a factor of 4 and NI has more than doubled. You completely omitted the recruitment and retention problems in many areas – digital, engineering, scientific etc. I agree, there is a need to have an intelligent debate on rewards with independently properly researched figures on pay for grades and roles. But please do not patronise the public sector employees with look at the wonderful non-financial rewards whilst playing to the civil servants are overpaid brigade.

nian (not verified)

Submitted on 24 August, 2017 - 13:51
That works to some degree but the value of these 'benefits' is not a fixed or immutable thing it can vary over time. This would be resolved if you did the analysis each year (or two) and reoffered the choices. This then becomes a regular process and I suppose over time you could cut the processing and analytical time and costs. I think for many reasons the pension should be kept out of this unless the option is to pay in more. The idea also does nothing to address the issues of pay progression and pay awards. Maybe a better system would be one that has been used in the private sector and that is all get the standard cost of living pay rise and some degree of progression (required in the civil service to close some of the gender pay gaps). All you staff have the same leave allocation etc. Then you have a catalogue of benefits; BUPA health care, lease car, extra leave, extra pay, child care etc etc each with a points cost. Then based on whatever system you like your staff are awarded a number of points, so more if they have rare skills, more for length of service, more for previous good performance etc etc. Then each year they spend their points as best suits the way they want to live life and experience work. And then of course you have the start of a nice mini industry employing a few people or more likely farmed out to a private provider to deliver their version of the system and take a nice little cut. But all with the idea in mind staff doing similar work have similar base salaries and there is a cost of living pay adjustment each year. Or of course you step back and decide that there is a real difference between being a private employee and a Civil Servant and you are happy for that to be the case.

Anonymous (not verified)

Submitted on 24 August, 2017 - 15:43
Trading off leave for being paid properly ? Sounds great....

MJDW (not verified)

Submitted on 25 August, 2017 - 15:14
Fundamentally disagree with this. The launching point for this article is that 'finding more money is politically tricky'. The only part in GE '17 who thought that scraped 'past the post' a reduced majority and one of the reasons attributed to that was their stance on public services including pay. Get past that blind spot and you won't be inviting civil servants to horse trade their existing (and slimmed down since 2010) remuneration packages just to make up an increasing gap between their pay and inflation.

Anonymous (not verified)

Submitted on 29 August, 2017 - 10:01
An excellent article with a sensible, pragmatic and workable proposal. However, until the day when improving the morale and capability of our Public Sector has a greater influence than right wing editorial opinions, these kind of ideas will simply fall on deaf ears.

Anon (not verified)

Submitted on 29 August, 2017 - 13:09
Give up your holiday to get paid properly ? Sounds like a great idea..........

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