Senior Civil Service Pay and Performance Management. Newsletter

Transcription

1 CABINET OFFICE Senior Civil Service Pay and Performance Management To all SCS members The SSRB Special Report About this Newsletter Newsletter Issue 7 January 2002 We are pleased to be able to let you know that the Government has just published its response to the special report by the Senior Salaries Review Body (SSRB) on SCS pay. The report recommended indicative pay ranges and target rates for the new SCS pay system as at April The Government has decided to: a) accept the SSRB s recommendations on pay band minima and maxima (the Recruitment & Performance Ceiling); b) accept the SSRB s recommended target rates for the best 25% of performers and incorporate them into the pay band as a Higher Performance Target Rate; c) set Progression Target Rates at the levels originally proposed in our consultation with you last year (suitably revalorised); d) re-distribute the additional cost implied by the SSRB s proposals within the system about 3m. Part of this will go to increase the rate at which the non-consolidated bonus pot is built up in the first three years. The balance will go into faster progression for top performers. This special report did not make recommendations on percentage figures for base pay awards or bonuses. That will be addressed in the SSRB s next annual report due in February. The rest of this Newsletter explains the background to the SSRB report and what it means for you. 1

2 Background Earlier this year, you will have received an SCS Pay and Performance Management Information and Support pack (in a pink and grey binder) confirming the new arrangements. You should also have been given the opportunity to attend training on the new system run by your department. The new performance management arrangements are already in operation for the reporting year 2001/2002, with the new pay arrangements due to come into effect from 1 April To provide a baseline for calculating pay awards later in the year and to help departments plan for transition to the new pay structure, the Senior Salaries Review Body (SSRB) were asked to produce a special report recommending indicative pay ranges as they might have been at April These figures will not affect your pay this year. The final pay ranges and target rates for use from April 2002 will be considered by Ministers after the SSRB s next regular report in February. Who are the SSRB? The SSRB are an independent body, providing advice to the Prime Minister, the Lord Chancellor and the Secretary of State for Defence primarily on the remuneration of the judiciary, senior civil servants, senior officers of the armed forces and Members of Parliament. The Senior Salaries Review Body will continue to provide independent advice to the Government on SCS pay under the new system. The SSRB Special Report The Review Body were asked by the Government to produce a special report recommending appropriate pay ranges and target rates for the new SCS pay structure. They were also asked to recommend London ranges and target rates for pay bands 1 and 1A. They were not asked to consider pay awards or revalorisation - these issues will be addressed in the SSRB s next normal annual report due in February. In making its recommendations, the SSRB received evidence and advice from three different sources: Cabinet Office, on behalf of the Government; Council of Civil Service Unions (CCSU); and Independent consultants Towers Perrin who were commissioned by the Review Body to conduct a pay comparability exercise. SSRB Recommendations The SSRB generally welcomed the structure of the new pay and performance management system. It also agreed that there should not be different pay bands or target rates for particular job functions within the SCS, although particular vacancies may have to offer higher shadow target rates in order to attract the right candidate. 2

3 The main recommendations contained in the special report are: To address the shortfall of SCS pay levels against those at equivalent levels in the private sector, an upper quartile market benchmark should apply to the Recruitment and Performance Ceilings (the maxima) of the SCS pay bands, but minima should be set in line with mid-market minimum salaries; Target rates for Bands 2 and 3 should be set at higher points in the pay ranges than for those in Bands 1 and 1A, to address a wider gap between SCS and private sector pay levels for posts at the higher JESP scores; Target rates for Bands 1 and 1A should be set at the midpoint of each pay range and those for Band 2 and 3 at 55% and 60% respectively; A London differential is not justified by the market data. Although the SSRB recommended that a London target rate, if required, should be set at 3,500 above the standard target rate, they asked the Cabinet Office to look again at whether a higher London target rate was justified. Consequently, the SSRB recommended the following indicative pay ranges for 2001: Pay Band Recommended Minimum Recommended Progression Target Rate Recommended Recruitment & Performance Ceiling 1 50,000 78, ,000 1A 58,000 87, , , , , , , ,000 The SSRB recognised that their recommended target rates were significantly higher than originally envisaged by the Government. The reasons for this are set out below. Since costs also had to be contained within an envelope agreed with Ministers, they therefore proposed longer progression times to the target rates: between 5 and 8 years for a tranche 1 performer and between 15 and 22 years for a tranche 2 performer, compared to 4 and 10 years respectively under the consultation proposals. They suggested that Government should look again at these very long progression times some time in the future. Implications of the SSRB Special Report Whilst the minima and Recruitment & Performance Ceilings recommended by the SSRB are similar to those proposed by the Cabinet Office during consultation, the target rates are higher. This is because the SSRB decided that they should incorporate into base pay the value of other rewards typically found in the private sector, including bonuses, perks, company cars etc. Other Civil Service benefits and non-pay rewards were either left out of the equation or off-set against the value of long term incentive schemes available in the private sector. 3

4 The original design of the new pay system drew a delicate balance between market-facing target rates, progression times and affordability. The SSRB took the view that achieving a degree of parity in pay levels with the private sector should take precedence over progression times. This would have undermined the commitments on progression given by the Civil Service Management Board during consultation. Even with the much slower progression times proposed, the recommended target rates would also have resulted in a potentially significant increase in the long term costs of the new system. Actually trying to maintain the progression times originally set out in consultation alongside the target rates recommended by the SSRB would have increased the overall costs of the new system by well over 30% more than the original assumptions. The Government s Response & The Way Forward The Government has therefore decided to: a) accept the SSRB s recommendations on pay band minima and maxima (the Recruitment & Performance Ceiling); b) accept the SSRB s recommended target rates for the best 25% of performers and incorporate them into the pay band as a Higher Performance Target Rate; c) set Progression Target Rates at the levels originally proposed in consultation (suitably revalorised); d) re-distribute the additional cost implied by the SSRB s proposals within the system about 3m. Part of this will go to increase the rate at which the non-consolidated bonus pot is built up an additional 0.9m in each of the first three years. The balance will go into faster progression for the top performers between the Progression Target Rate and the new Higher Performance Target Rate. The consequence is a revised pay band structure as at Figure 1 below. 1 1A 2 3 Recruitment & Performance Ceiling (RPC) Higher Performance Target Rate (HPTR) Progression Target Rate (PTR) JESP Minimum JESP JESP 7-12 Nominal JESP Figure 1 4

5 The resulting final indicative pay ranges and target rates as at 1 April 2001 are as follows: Pay Band Indicative Minimum Indicative Progression Target Rate Indicative Higher Performance Target Rate Indicative Recruitment & Performance Ceiling 1 50,000 69,500 78, ,000 1A 58,000 78,000 87, , ,000 93, , , , , , ,000 The Government has also decided to retain the flexibility to offer a higher London target rate where there is a clear business need to do so. Where a London target rate is used the pay band minima and PTR for bands 1 and 1A will be 3,500 higher than shown above. The HPTR and RPC will be unchanged. The additional money being re-distributed into the bonus pot means that, on current assumptions, we now expect bonuses in the top tranche to average 10% and in the middle tranche 5% by the end of the third year. The actual figures will, of course, depend on the SSRB s recommendations in February and the pay strategy adopted by your department. How the New Pay Structure Will Work The addition of the Higher Performance Target Rate (HPTR) makes little difference to the way annual awards are calculated. Using a pay matrix, pay awards will still be based on your position in the pay range and your performance tranche allocation. Everyone will have the potential to reach the Progression Target Rate (PTR), but only the top 25% (the top tranche) in any one year will be able to progress beyond it. Those in the top tranche who reach the PTR will, however, now progress faster than originally envisaged from the PTR to the HPTR. They will also be able to progress beyond the HPTR towards the pay band ceiling, but at a slightly slower rate. The addition of the HPTR makes no difference to the awards made to people outside the top tranche, but whose pay is already at or above the PTR. You will receive a fully consolidated, fully pensionable award equivalent to the level of revalorisation that year of the PTR. The Next SSRB Report The SSRB are due to publish their next normal annual report in February. This will take account of the Government s decisions and will recommend the pay levels to be applied from 1 April It is likely that the SSRB will recommend a simple revalorisation percentage by which the pay ranges and target rates should be raised. The report will also recommend the range of base pay awards and bonuses to be paid for the 2002 pay round. 5

6 Assimilation to the New System Now that the levels for the new system have been set, your department will begin to plan for the transition from 1 April this year. You will move onto the new system as first awards are made from April 2002 onwards. If your first award does not bring you up to the pay band minimum, your pay will be increased to the minimum. As we said in the last Newsletter, additional measures are being put in place to smooth the process of transition: departments will have some limited flexibility to adjust people s salaries on an individual basis where there are particular anomalies. Your department will draw up criteria for making any such adjustments and will publish them internally. we have developed a pension protection scheme for those people whose salary is above the PTR and who are near to retirement. Detailed guidance on how this will operate will be circulated to Personnel Directors shortly. Briefly, some protection will be provided if you are: paid above (or move through) the progression target rate of the new pay ranges; and aged 55 or over on 1 April Bonus payments are normally non-pensionable. Under the protection arrangements, a portion of any bonus you earn during the performance appraisal years 1 April 2001 to 31 March 2004 will be taken into account when working out your PCSPS pension and lump-sum retirement benefit. Conclusion The publication of the Government s response to the special SSRB report is good news for the Civil Service. It means that your department can now begin the final detailed planning for transition to the new SCS pay system. Importantly, it also means that you can now see in reality what it means for you. The new system represents a real opportunity for the SCS. It will put substantial new money into SCS pay, it will improve pay progression for many and it will enable us to reward excellence. It also puts the Civil Service in a stronger position to improve delivery by enabling us to bring in and reward talent and promoting continuous improvement. The Government s decision demonstrates its commitment to fair pay and to rewarding those who deliver results. Further information can be obtained from If you have any queries you should speak, in the first instance, to your local SCS pay contact or your Personnel Director. We will continue to keep you in touch with developments, including the publication of the next SSRB report, through future editions of this Newsletter. Performance & Reward Division Cabinet Office 6