The Cabinet Office should do more to help tackle the pay differences across departments which contribute to an "internal civil service market" competing for the same pool of staff, according to a new report from the National Audit Office.
To do this, the public spending watchdog says, the Cabinet Office should produce an annual report on pay differentials across the civil service and to work with departments on ways that the most problematic imbalances can be fixed.
Its new report, Civil service workforce: Recruitment, pay and performance management, the NAO identifies differences of up to £3,500 a year in the median pay of executive officers working for different government departments in Newcastle. It found inter-departmental differences in median EO pay of £2,700 in Liverpool and Sheffield, £3,000 in Birmingham and £3,400 in Darlington.
The NAO said an analysis of Annual Civil Service Employment Survey data for 2022 found a difference of £6,100 a year between the highest and lowest median departmental pay for senior executive officers. The Department for Work and Pensions was the lowest-paying; the Foreign, Commonwealth and Development Office was the highest.
When it came to specialist roles, the NAO's analysis revealed a difference of £13,100 in the highest median pay for Grade 6 digital professionals. The Department for Environment, Food and Rural Affairs was at the lowest end of the range; the Home Office was at the highest.
NAO head Gareth Davies said a degree of difference in the way departments organise and manage their workforces was to be expected given the different functions and services they deliver.
But he said the watchdog’s analysis had indicated there is scope to improve efficiencies in crucial areas.
“The Cabinet Office has a fundamental role to play in requiring departments to collect consistent HR data and helping them understand where and how efficiency could be improved,” he said.
“It also has a responsibility to minimise unintended effects such as departments competing against each other for staff.
“The Cabinet Office and departments need to work together more effectively to drive efficiency and help the civil service meet the challenges and pressures it faces.”
Elsewhere, the report found that while departments had reported spending up to £26m on recruitment in 2021-2022, most had been unable to provide data on their full recruitment costs. The only exceptions were HM Revenue and Customs and the then-Department for Digital, Culture Media and Sport.
In its recommendations, the NAO called on the Cabinet Office to report on pay differentials across departments from 2024-25 and work with departments to minimise the “undesirable effects” of competition for the same staff.
On recruitment costs, the Cabinet Office is urged to require departments to report “fully and regularly” on metrics that have been developed so performance across the whole civil service can be monitored and benchmarked.
The NAO said the Cabinet Office should review the way recruitment is delivered across the civil service by the end of 2025, with a view to assessing the efficiency of different approaches – including services delivered by the Government Recruitment Service.
A government spokesperson said: “We have implemented a central recruitment service for the civil service - cutting spend and time, including through using automation which is 70% faster.
“Between August and October 2023, the average time taken to hire decreased by around 12%, and is on track to meet service targets by December 2023.”
The NAO also said the Cabinet Office needs to work with departments to help them assess the effectiveness of their performance-management systems. The report found three out of 16 departments could not identify how many underperforming staff they had in 2022, while almost two thirds did not know what happened to staff after they were classified as underperforming.
Public Accounts Committee chair Dame Meg Hillier said the NAO report underscored the need for more central support to be given to departments.
“Departments need to better understand how they recruit, manage and motivate people,” she said.
“Some variation is expected but it can also mean departments’ HR processes are less efficient than they should be.”
The government spokesperson added: “We are focussed on driving productivity and efficiency in the civil service, and are supporting it to be a leaner and more effective workforce.
“We are capping headcount at its current level, which could save up to £1bn, and government departments will submit long-term productivity plans that will help to modernise the civil service – delivering high-quality public services at a lower cost."