HM Revenue and Customs staff are in line for a wage rise this year and for each of the next two years under a freeze-busting pay offer from the department that comes alongside major reforms to its working conditions.
Under a pay deal that is 15 months in the making, HMRC is offering its 60,000 staff in grades AA to G6 an average pay increase of 3% this year, 5% for 2021-22 and 5% for 2022-23. Senior civil service pay is set separately.
The tax agency is also standardising contracts for staff to eliminate what its permanent secretary Jim Harra has called “inherent unfairness” in working conditions.
The changes will mean working hours and annual leave entitlements are standardised, all staff are entitled to partial remote working, and staff are paid the same for doing the same job.
The overall package is intended to address what Harra has called a “crisis” of pay and working conditions. In October 2019, soon after being appointed perm sec, Harra told the Treasury Select Committee there was an urgent need to increase pay as staff were “very, very dissatisfied”, and that reform was needed to tackle structural problems.
Among other things, he promised to tackle uneven working conditions that mean some staff are being paid different amounts for doing the same job, depending on when they were hired or promoted.
“We've got a bewildering array of different contracts – thousands and thousands of different contractual terms – and we'll be moving all colleagues onto a standard contract,” Harra said.
The contract will include a 37-hour working week for full-time employees, and a standard allowance of 25 days’ annual leave a year – increasing incrementally with time up to a cap of 30 days.
Customer service staff will be required to work a maximum of one evening shift a week and six Saturdays a year as required.
The contracts will also entitle every official to work at least two days a week from home.
Officials who have been recruited more recently are likely to benefit most, while those who have worked for the department for a long time may see some “personal disadvantages”, such as a decrease in annual leave or changes to their working patterns, Harra said.
“But it is important that we're able to do that for two reasons,” he said.
“One, to give the customer service that we want, but also to be fair between all colleagues. Some colleagues are probably having to do more evening and weekend shifts at the moment than they're going to end up doing because others are doing fewer. So to achieve that fairness, it does mean that some people are going to experience some change that they may not personally welcome."
The changes will also enable HMRC to fund the pay rise, he added.
The department has not been given extra funding from the Treasury for the pay bump, and is instead using the reforms to create “efficiencies” that it is recycling into staff pay, he said.
Those efficiencies include changing the standard working day from 7am to 8pm to match HMRC’s customer service opening hours. The department will no longer pay overtime for shifts worked within those hours.
Previously, the department has had to rely on staff voluntarily working overtime so that customer-service lines can stay open, and the change will “enable us to fit our resources into the working day in a more cost-efficient way”, Harra said.
This reallocation of resources helped HMRC make the case to the Treasury and Cabinet Office to approve the pay increase, despite the freeze announced by the chancellor, Rishi Sunak, last year.
The freeze means most civil servants’ pay will not increase next year, but allows for some exceptions.
“The key thing for us is that we were able to demonstrate that we are furthering the reform of public services here," Harra said. "As well as doing something for our people in terms of improving their pay and the fairness of their pay system, we're also doing something for public services by furthering reforms and working arrangements so that you know that we are more customer focused. And that's obviously something that ministers are keenly interested in."
Pay increases will be weighted towards those at the lower end of their pay ranges, or on lower salaries.
“When I became chief executive, I identified pay and contract reform as a key priority for me and HMRC, because it's a key priority for our people. And I think it's necessary both to help me make HMRC the modern, trusted tax authority I want it to be, but also to make it a great place to work for our people,” Harra said.
Over the next three weeks, unions will ballot their members on the pay deal. If the deal is agreed, this year’s pay rise will be paid in March and backdated to June 2020, the beginning of HMRC’s pay year.
HMRC has launched a major comms push to inform staff about the changes, beginning with a live stream for employees today by Harra, explaining the reforms and answering questions.
Included in the reforms is a commitment that HMRC will work with trade unions on any changes to people's working arrangements.