The government has once again been urged to implement pay progression for the senior civil service, as its advisers warn it is losing money because of high turnover.
The Senior Salaries Review Body has said it is “concerned that the failure to pinpoint savings or find new money to implement pay progression in the SCS is creating significant costs and inefficiencies because of the relatively short periods of time that many individuals have been in their posts”.
Each year, the SSRB makes recommendations on pay and employment terms for senior civil service, senior military, senior managers in the NHS and the judiciary.
However, the public-sector pay freeze introduced in last year’s Budget meant the group was not asked to consider pay rises this year.
Instead, this year’s report focused on how the government could address recruitment, retention and strategic priorities for each of the groups.
The panel found “no significant recruitment and retention problems” in the groups it was looking at, other than in the judiciary and a small number of specialist areas.
But it said some priorities nevertheless needed to be addressed. “In particular, we feel that a review of the purpose, size and composition of the senior civil service and the implementation of a simple pay progression system are well overdue,” the report said.
The Cabinet Office is preparing to develop a strategy entitled The 21st Century SCS, and to use the upcoming Spending Review to address some of these issues and look at the size of the SCS.
“If The 21st Century SCS does bring the intended coherence and articulates the future purpose, size and composition of the SCS, then it will be a very valuable advance,” the SSRB said.
The strategy should provide a means to determine which skills the SCS needs, as well as an approach to talent management “that attracts and develops the required leadership skills,” it added.
The report also called for “vigorous action to control undesirable churn, which continues to act as a brake on productivity and performance”.
This should include introducing a “simple and clear” pay progression system, backed by a business case setting out how it would improve outcomes and delivery – and therefore boost productivity.
It stressed that the emphasis should be on cost effectiveness, which could mean spending more in the short term to realise savings further down the line.
It noted the pay deal secured by HM Revenue and Customs in March, saying the “upfront investment in base pay will be returned in cost savings through more efficient service delivery”.
“Decisive action to improve outputs and outcomes is needed if reform is to be fully successful in managing the cost and productivity of the SCS,” it said.
Reforms should also take into account exceptions needed to attract and retain key specialists, “so that recruitment and retention challenges can be met without undermining the single leadership cadre,” the SSRB added.
Last year’s report also called for pay-progression reform, and the Cabinet Office has been preparing to introduce a capability-based pay system for the last few years – but neither has yet been implemented. Work on the capability-based pay is on hold until there is clarity on funding for pay in 2022-23.
“In relation to internal churn, we recognise that pay progression will not be sufficient on its own to reduce excessive churn, although we expect it to help considerably,” the report said.
“However, we are concerned that the key skills which may be rewarded by capability-based pay progression are those which are likely to be transferable in a generic or professional context. We do not see how this gives individuals an incentive to remain longer in their posts and increase their expertise, efficiency and accountability for outcomes.”
Alongside pay, the report called on the government to overhaul performance management, based on outcomes, “under which individuals can see clearly how their achievements will be rewarded and recognised”.
Pay progression should be dependent upon people’s performance against outcome-focused objectives, the SSRB said.
When implementing the above changes, the group stressed that the government must minimise complexity and create an “integrated and understandable approach to reward”.
The document also stressed that pay is only one element of civil servants’ overall reward package – which also includes a high level of job security and flexibility.
Pensions are also a “substantial and valued part of the total reward package and a major benefit of senior public sector employment”, the report noted.
However, it noted that people being promoted often face a hefty tax bill.
“It is understandable that individuals with a big and unexpected bill today are not always placated by the fact that they will have very good pension benefits in the future. We recommend advice is made available to those seeking promotion to help them understand and manage this situation,” the SSRB said.
Announcing the report’s publication yesterday in the House of Commons, Cabinet Office minister Michael Gove said: “The government welcomes the Senior Salary Review Body’s report and is grateful to the chair and members for their valuable advice, observations and strategic recommendations outlined within it.”
He said the SSRB had not been asked to consider consolidated pay increases in light of the pay freeze so “we can get the public finances back onto a sustainable path after unprecedented government spending on the response to Covid-19”.