Public-sector pay review bodies 2013: 1% average awards follow government pay policy

In the first year following the two-year public-sector pay freeze, the independent public-sector pay review bodies were asked to make recommendations in line with the Government's policy of awards averaging 1% from 1 April 2013. Although most of them did so, not all the recommendations were accepted by the Government. 

For the workforces covered by the independent public-sector pay review bodies, 2013 marked the exit from the two-year pay freeze and the start of the next stage of the Government's public-sector pay restraint announced in the 2011 Autumn Statement: awards limited to an average of 1%.

Initially, it was announced that the average increase of 1% would apply for each of the two years after the pay freeze, but in the 2013 Budget on 20 March, the Chancellor extended this limit for a further year - so for around 2.5 million workers covered by the six pay review bodies, the period of pay restraint will continue until 2016.

The Budget announcement was made after the Government had responded to the recommendations on the pay award from 1 April 2013 made by five of the pay review bodies - the Armed Forces' Pay Review Body (AFPRB), the Prison Service Pay Review Body (PSPRB) covering England and Wales, the NHS Pay Review Body (NHSPRB), the Review Body on Doctors' and Dentists' Remuneration (DDRB) and the Review Body on Senior Salaries (SSRB) - which were published on 14 March 2013 on the Office of Manpower Economics website.

The sixth review body - the School Teachers' Review Body - is due to submit its report at the end of May 2013. The review body recommendations covered in this feature are summarised in table 1. While the recommended 1% increase for NHS staff on Agenda for Change (AfC) contracts, salaried doctors and dentists, and members of the judiciary - along with the recommendations made for various groups within the PSPRB remit group that increased the paybill by 1% overall - were accepted by the Government, other recommendations were rejected or not accepted immediately. We look at each of the pay review bodies' recommendations in more detail below.

Applying the 1% average increase

In the summer of 2012, chief secretary to the Treasury Danny Alexander wrote to the chairs of the pay review bodies to set out how they should approach the 2013/14 pay round. He stressed that the case for ongoing pay restraint in the public sector was strong, and that this was a "crucial part of the consolidation plans that will help put the UK back onto the path of fiscal sustainability".

The letter said: "In 2013/14, the Government will limit uplifts to an average of 1% in each workforce. The review body should therefore focus on considering how the 1% will be divided within their remit group. When considering their recommendations, review bodies may additionally want to consider the level of progression pay provided to the workforce and the potential for payments to be more generous for certain groups of staff.

"The 1% average uplift should be applied to the basic salary based on the normal interpretation of basic salary in each workforce. This definition does not include overtime or any regular payments such as London weighting, recruitment or retention premia or other allowances."

The letter was followed by remits from the relevant secretaries of state setting out the detail for how this should be applied for each of the review body remit groups.

The chairs of the SSRB, AFPRB, DDRB, PSPRB and NHSPRB wrote to the chief secretary to the Treasury to express their concern about the impact of the Government's approach to pay policy on the independence of the review body system. They explained their belief that pay review bodies add more value and operate with the trust and confidence of the parties involved when their reports are produced under their normal terms of reference without the Government placing specific restrictions on the scope of their recommendations.

The letter said: "The issue concerning us is not the Government's decision to have a policy on public-sector pay, but that our remit has been expressed in a way which has led to our independence being increasingly questioned by our remit groups. We believe that, as a result, the trust and confidence they have in us, which is the cornerstone of our role, is at risk."

In his response, Alexander confirmed that the views of the review body chairs would be taken into account when considering future remits, saying that the independence of the review bodies was of paramount importance.

NHS Pay Review Body

The NHSPRB covers around 1,364,000 NHS staff working under the AfC agreement in the UK (headcount figure as at 30 September 2011). The review body makes recommendations to the first ministers and health ministers in Scotland, Wales and Northern Ireland, as well as to the Prime Minister and secretary of state for health. The Welsh Government and the Northern Ireland Executive applied the same pay policy as the UK Government. The approach to public-sector pay taken by the Scottish Government was broadly similar, but with "a distinctively Scottish dimension with a clear commitment to a pay policy that is fair, protects jobs and services and supports the lowest earners" - the key features include continuing to freeze the pay of the highest earners (those earning more than £80,000 a year), increasing the pay of those earning less than £21,000 by a minimum of £250, and a commitment to pay the Scottish living wage and avoid compulsory redundancies.

The NHSPRB said it believed that the Government's approach to limiting public-sector pay awards "pre-judged the outcome of our deliberations and also influenced the expectations of the public-sector staff affected". It had, the review body said, "effectively set not only a ceiling but also, in practice, a baseline to our considerations".

The review body recognised the financial pressures in the NHS, noting that 58% of AfC staff will be eligible to receive incremental pay progression averaging 3.4%, but believed that a pay award of less than 1% would adversely affect staff motivation at a time when engagement and motivation are already in decline.

Given the constraints of the Government's public-sector pay policy and staff expectations, the review body concluded that a uniform pay uplift was affordable and appropriate, as all AfC staff are expected to contribute to the significant changes across the NHS, and recommended a 1% increase to all pay points from 1 April 2013.

The review body was also asked to consider whether high-cost-area supplements (HCAS) or other allowances should be changed, and it concluded that it should return to its usual practice of uprating the minima and maxima of the HCAS in line with the overall pay award (these were not uprated during the two-year pay freeze) and recommended a 1% increase.

Responding to the review body's report, secretary of state for health Jeremy Hunt said the recommendations of the review body would be accepted in full, and the recommended 1% increase was accepted by the Welsh and Scottish Governments. In Scotland, NHS staff earning less than £21,000 a year will receive an additional non-consolidated payment to ensure that their earnings increase by at least £250. The resulting pay scales are shown in table 2. At the time of writing, it had not been confirmed whether or not the recommendations would be accepted in Northern Ireland.

Agenda for Change - changes in England

While the review body was preparing its report, the NHS Staff Council in England was holding separate discussions on proposed changes to terms and conditions for staff on AfC contracts. The changes, which were agreed on 26 February 2013, took effect from 1 April 2013. The review body said it would welcome clarification of how the devolved administrations would respond to these developments.

Review Body on Doctors' and Dentists' Remuneration

The DDRB covers 206,580 doctors and dentists working in the NHS in the UK (as at September 2011). For 2013, following correspondence with the Department of Health in England and the devolved administrations in Wales, Scotland and Northern Ireland, it made recommendations on pay for all salaried doctors and dentists, all independent contractor general medical practitioners (GMPs) and independent contractor general dental practitioners (GDPs) in Scotland.

The review body weighed up the factors supporting a reasonable increase in pay - such as a deterioration in the relative earnings of its remit group and a decline in staff satisfaction with their pay - against the evidence on the financial situation in the NHS, and concluded that a zero uplift could be demotivating in the light of expectations of an average 1% uplift following the Chancellor's 2011 autumn statement. It therefore judged that there should be an increase of 1% in basic pay for its remit groups and recommended that this should apply across the board, with national pay scales for salaried doctors and dentists increasing by 1% and the minimum and maximum of the range for salaried GMPs increasing by the same amount.

For independent GMPs, the review body recommended an increase of 2.29% to the overall value of general medical service contract payments, designed to result in a 1% increase in net income. To increase the net income of independent GDPs in Scotland by 1%, the review body recommended that an uplift of 1.49% be applied to item-of-service fees.

Although the recommendations in respect of salaried doctors and dentists were accepted by Hunt, the overall increase recommended for general medical services payments was reduced to 1.32% rather than 2.29%, as the increase in the allowance for practice staff costs was set at 1% in line with public-sector pay policy.

The Welsh Government reached agreement on changes to the GP contract with the General Practitioners Committee Wales in January 2013, and decided that the agreed uplift of 1.5% would not be revised after considering the DDRB's recommendations.

At the time of writing, it had not been confirmed if the recommendations on salaried doctors and dentists would be accepted in Wales, and there was no confirmation on the position on the DDRB's recommendations in Northern Ireland. The Scottish Government was still considering the review body's recommended increases for GMPs and GDPs.

Prison Service Pay Review Body

The PSPRB makes recommendations on the pay of 30,821 operational managers, prison officers and support grades in the public-sector prison service in England and Wales. In addition to making recommendations on the pay increase from 1 April 2013, the review body was also asked to look at the new pay and grading arrangements under the Fair and Sustainable agreement.

The review body had endorsed the proposals for two of the new pay bands in 2012, when its remit was restricted to the pay of those earning £21,000 a year or less. The National Offender Management Service (NOMS) evidence for the current report proposed some changes to the structure, which consists of 11 bands with inner London, outer London and national pay ranges.

With the introduction of Fair and Sustainable, the PSPRB has to consider a wide variety of pay arrangements among members of its remit group, as although those not on the new grades can opt in to these, for many there is no financial incentive to do so and so they remain on the old closed grades. The review body therefore recommended three types of pay increase:

• revised pay ranges and consolidated progression for those in the new pay bands;
• increases to some of the new pay bands to give a consolidated pay increase to those opting in to the new structure (although this does not apply to the majority of the remit group who are prison officers and senior officers in the old grades, nor to some staff in establishments that previously qualified for locality pay under the old grades); and
• a non-consolidated increase of £250 for those at the maximum of the prison officer and manager G pay scales and the senior officer spot rate in the old grades. Those below the maximum in these grades will receive a pay increase through contractual incremental progression.

The review body acknowledged the complexity of the situation, saying: "For some staff, access to a pay award is dependent upon them opting into Fair and Sustainable and its terms and conditions... In addition, we acknowledge that the arrangements this year will not result in a flat 1% increase for each member of staff choosing to access an award. Instead the precise increase will depend on the pay arrangements for each particular pay scale and pay point staff are on and whether they choose to opt in."

The lowest pay band in the new structure, band 1, contains a single pay point. Bands 2 to 5 have incremental pay points, and bands 6 to 11 are open ranges without fixed pay steps. For staff below the maxima in pay bands 2 to 5, the review body recommended that they receive one incremental point of pay progression in addition to increases arising from changes to pay scales. For staff in bands 7 to 11, the review body recommended a 1.5% pay progression increase. It also recommended that staff in these pay bands receiving an "exceeded" performance marking should receive a non-consolidated award worth 1% of their pay level as at 31 March 2013.

As staff in band 6 are non-operational and do not fall within the remit of the review body, it did not make recommendations on increases for this band, or for pay band 1. However, some Fair and Sustainable pay bands cover both operational and non-operational staff, so the review body's recommendations automatically apply to some non-operational staff. The review body again raised the issue of the logic of its recommendations being translated across to staff outside its remit group and recommended that NOMS and the trade unions bring forward proposals on how the representation of non-operational staff should be dealt with.

The review body estimated that its recommended increases would add 1% to the basic paybill, assuming that all staff would opt in to the new pay structure where there is a financial incentive to do so, in addition to the cost of contractual incremental progression for those on the old, pre Fair and Sustainable grades.

The pay recommendations for 2013/14 were accepted in full by the Government.

Armed Forces' Pay Review Body

The AFPRB covers around 175,000 service personnel at and below the rank of brigadier and equivalent. Senior officers in the armed forces fall under the remit of the Review Body on Senior Salaries. The 2013 report coincided with the review body's five-year review of the X-factor - an addition to pay that recognises the special conditions of service experienced by members of the armed forces compared with civilian employment.

The review body expressed regret that its remit had been constrained for a third year, and stressed its independent role. It decided to revert to its usual approach of considering the whole range of evidence received - including affordability issues and government policy on pay restraint - in making recommendations in line with its terms of reference, which require it to have regard to "the need to recruit, retain and motivate suitably able and qualified people, taking account of the particular circumstances of service life".

The review body recommended a 1% increase in base pay across the board from 1 April 2013, supporting the proposal from the Ministry of Defence, with the same increase applied to payments including specialist pay, reserves' bounties and compensatory allowances.

For its review of the X-factor, the AFPRB looked at changes in military life in the five years since its previous assessment, considering each of the 18 components that make up the X-factor, including: job satisfaction; job security; training; danger; turbulence; separation; and stress at work. It concluded that there had been a deterioration in the conditions of military life in comparison with civilian life, particularly in the areas of danger, turbulence and separation from home and family, and recommended an increase of 0.5 percentage points in the X-factor, to 14.5% of base pay. The payment is tapered, with senior officers up to OF8 (a lieutenant-general in the army), under the remit of the SSRB, receiving a proportion of the payment.

The AFPRB noted that the X-factor is a feature of the reward package that is unique to military life. It said: "In our view, this distinguishes it from normal base pay which, consistent with its overall policy on public-sector pay restraint, the Government wishes to constrain this year."

It concluded: "Our recommendations constitute a package which we invite Government to consider as a whole."

The secretary of state for defence, Philip Hammond, responded to the report, saying that the recommendations would be accepted in full, apart from the recommended increase in the X-factor, "which would result in costs for which the Department has not currently budgeted".

In the Budget statement on 20 March 2013, the Chancellor announced that the recommendation to increase the X-factor would also be accepted, effective from 1 May 2013. Examples of the resulting pay scales are shown in table 3. The Chancellor also said the armed forces would be exempt from reforms to progression pay announced in the Budget - around three-quarters of armed forces personnel benefit from these annual payments as they are not at the top of their pay scale.

Review Body on Senior Salaries

The SSRB makes recommendations on pay for the senior civil service, senior officers in the armed forces, the judiciary and very senior managers (VSMs) in the NHS in England. The review body began its report with criticism of the way the Government is treating these remit groups, saying that it was increasingly concerned that the Government was taking the loyalty and commitment of these groups for granted and was not following the principles that the review body had previously proposed for their remuneration.

Senior civil service

The review body was particularly critical of the senior civil service pay system, noting that "the Government has declined to propose the necessary major reform this year". Instead - in view of financial constraints - the Government suggested minor changes to the existing system, identifying its priorities as "surgical uplift to address pay anomalies", recruitment and retention of key skills and incentives for high performers. The Government proposed:

• targeted base pay increases between nil and 9% to be decided by individual departments, with no award for those in the bottom 10% of performance distribution;
• increasing pay band minima to tackle the overlap between the salaries of senior civil servants and those that report to them;
• up to 3.3% of paybill being made available for non-consolidated performance awards to the top 25% of performers and lifting the current caps on awards; and
• the introduction of a pivotal role allowance to encourage senior civil service members to remain in post to see major projects through, with allowances linked to the achievement of key milestones.

The number of senior civil servants in the remit group has dropped significantly over the past two years and in 2012 stood at 3,616, almost back at the 2002 level. The review body expressed the opinion that part of the money saved by the reduction in paybill could be used to fund restructuring of the pay system, and recommended that the Government consider reforms along the lines of those carried out in Northern Ireland, which were based on recommendations made by the SSRB.

The review body recommended uplifts to the pay range minima that varied slightly from those proposed by the Government. For base pay, instead of the targeted increases put forward, the SSRB felt it would be fairer to give a uniform increase of 1% of paybill to all except the bottom 10% of performers, and to increase the top of each pay band by 1%. Although it expressed serious concerns about the performance-related pay system, the review body said it would "reluctantly endorse" the continuation of the current arrangements but believed the limits on the awards that could be made for each pay band should be retained. It supported the pivotal role allowance on an "experimental basis".

Responding to the report, Prime Minister David Cameron said the Government rejected most of these recommendations, including those on increasing the pay band maxima by 1% and awarding a uniform pay uplift. Instead, pay awards will be made in line with the Government's original proposals, with increases to pay band minima as it had set out, and departments using the balance of a 1% average increase after staff have been raised to the new minima to make awards between nil and 9% to all but the bottom 10% performance group.

The ceilings on individual performance awards will apply for performance in 2012/13, but there will be greater flexibility in the awards for performance in 2013/14. The pay bands are shown in table 4.

Senior officers in the armed forces

As at 1 July 2012, there were 125 senior officers in the armed forces at two-star level and above. In line with government policy, the Ministry of Defence proposed a 1% base pay increase from 1 April 2013 for the senior military remit group, an approach that the review body supported.

The review body also said the 10% base pay differential between one-star and two-star rank before X-factor should be preserved, and that the pay differentials for the five medical and dental officers at two-star level and above should be preserved in relation to the pay of one-star medical and dental officers, whose pay falls within the remit of the AFPRB. The recommendation on basic pay was accepted by the Government.

The X-factor increase as recommended by the AFPRB - and accepted by the Chancellor in the Budget - also applies to senior officers at two-star and three-star level, who receive 25% of the cash value of the X-factor at the top of the OF4 pay scale from 1 May 2013.

The judiciary

There were 2,219 salaried judicial office holders falling under the remit of the SSRB on 31 March 2012. All of these have seen their pay frozen for the past three years. The Ministry of Justice proposed an increase in pay of 1% across the board to the judiciary from 1 April 2013, which the review body supported.

The SSRB returned to the review of judicial salaries it published in 2011 and said the Government should address the outstanding recommendations by 2015, prior to the start of the next scheduled review in 2016. It also recommended that the new judicial salary structure it had proposed be uplifted by 1%.

The Government accepted the recommendation to increase judicial salaries by 1% and said it noted the SSRB's proposals on the salary review, but that "as a result of the current fiscal challenge and public-sector pay policy it is not possible at present to respond to the SSRB's latest recommendations".

Very senior managers in the NHS

Since the addition of very VSMs in the NHS to the remit of the SSRB in 2007, this group has undergone significant changes, with the NHS reforms introduced under the Health and Social Care Act 2012 replacing the strategic health authorities and primary care trusts as the main employers of VSMs with the NHS Commissioning Board (now NHS England). During the transition period, the Department of Health found it difficult to calculate how many VSMs would be in the remit group by 1 April 2013 but estimated this to be 497 - VSMs in national bodies are within the review body's remit, but those organisations that operate at a local level are free to set their own pay rates.

Prior to 2012, the salary of VSMs was set according to a pay framework that placed organisations in bands depending on weighting factors, rather than on job size. A new pay framework, based on job evaluation, was introduced in 2012 for VSMs - but this applied only to newly created posts and to new appointments to existing posts in arm's length bodies. The review body felt this was unfair and could potentially lead to claims of discriminatory treatment, and as part of its report into market-facing pay published in December 2012 (on the Office of Manpower Economics website) recommended that all members of this group should be assimilated into the new pay framework once the NHS reforms were fully implemented - a proposal rejected by the secretary of state for health.

In its 2013 report, the review body expressed disappointment that the Department of Health still had no plans to migrate those on the old pay framework or on other non-standard frameworks to the new pay system, and recommended that the assimilation be phased in over a three-year period from April 2013.

On the question of the pay award for 2013, the Department of Health showed a preference for giving the same increase to all VSMs and the review body supported this, although it felt that pay awards should be used to start addressing some of the problems with the pay system from 2014/15. It therefore recommended an increase of 1% for all VSMs in its remit group. It also felt the current performance pay system was not satisfactory and should be reviewed, so recommended the suspension of performance pay, with the funds reallocated to addressing pay anomalies.

The Government accepted the recommendation to increase pay by 1% and the increase will apply across the board, other than to those not performing satisfactorily. However, the recommendation that VSMs should be migrated to the new pay framework was rejected, with the statement saying: "The new pay framework is clear that it must apply to all new appointments and that where very senior managers are employed in the same organisation on different frameworks, employers should undertake an equal pay review and remedy any inequalities identified. This satisfies all of the requirements of employment law and good practice."

The Government also rejected the recommendation to suspend performance-related pay, believing this played a useful role in the recruitment, retention and motivation of VSMs. The performance-related payments are expected to apply in the same way as in previous years, being restricted to the top 25% of performers with a maximum award of 5% of total pay.

Police officers

Following the recommendations of the Winsor review of police pay and conditions in England and Wales, the Government carried out a consultation on replacing the UK-wide Police Negotiating Board with a pay review body for police officers.

On 25 April 2013, Home Secretary Theresa May announced the Government's response to the consultation. It is proposed that a new Police Remuneration Review Body (PRRB) will make recommendations on police officer pay, allowances, hours of duty, leave and issue of clothing and equipment, for ranks up to and including chief superintendent, and the SSRB will make recommendations on chief officer pay. It is expected that the PRRB will come into operation by the autumn of 2014, with a view to making recommendations for the 2015/16 pay year.

The response document states that the Government intends the new review body's remit to extend to Northern Ireland as well as England and Wales. Scottish Justice Secretary Kenny MacAskill has said that a new Police Negotiating Board for Scotland will be established.

Pay progression

As well as extending the period of restraint on public-sector pay by a further year in the 2013 Budget, the Chancellor announced that the Government would seek savings through reforms to progression pay in the 2015/16 spending round, although the armed forces will be exempt from this change. The detail of how changes to progression pay might be implemented will be considered as part of the spending round, although it is expected that the expertise of the review bodies will feed into this process.

The various groups under the review body remits have different progression pay systems - in the NHS, for example, staff on AfC contracts are placed in pay bands within which they move up set pay points, while in the new prison service pay system the lower pay bands have incremental points, but the higher pay bands have no fixed steps between the band minimum and maximum. The judiciary are placed on spot rates with no incremental progression, and - as described above - pay increases for senior civil servants are based on performance, with the lowest 10% of performers receiving no increase in 2013.

The Government has asked the review bodies to consider the level of pay progression available to their workforces when considering their recommendations on pay during the two-year pay freeze and in the current pay round, and in previous years several of the review bodies have expressed the view that this progression should be a separate issue to the pay award.

In its 2013 report, the DDRB said that offsetting the earnings growth arising from increments against its recommended pay award would undermine the principle on which incremental pay scales are based. It added that if employers found the cost of increments unaffordable, this should be addressed through negotiations.

The changes agreed by the NHS Staff Council for employees on AfC contracts in England include making incremental pay progression for all pay points conditional on individuals demonstrating that they have the skills and knowledge required for their role and have shown the required levels of performance and delivery. In addition, in the highest three pay bands (8c, 8d and 9), progression to the last two points will become annually earned, and accelerated pay progression for staff joining band 5 will be removed. NHS Employers believes that the changes agreed take forward work to reduce the cost of incremental pay in the NHS. The latest data quoted by the review body showed that 42% of their remit group are at the top of their pay band.

The pay system under the Fair and Sustainable agreement in the prison service has the aspiration that staff should move from the minima to the maxima of the pay scales at a pace that reflects their competence, performance, skill and ability in the role. Pay progression is subject to performance marking, and the document stresses that progression will depend on public-sector pay policy and affordability as well as recommendations by the PSPRB. For those grades without fixed steps, the review body stressed that the guidelines and criteria for progression need to be transparent and satisfy equality laws, and said it wanted more information on this in time for its next report, adding that it was "not clear on the aims or operation of this system". It also requested evidence that those whose performance is satisfactory were making reasonable progress through the pay ranges.

From September 2013, school teachers in England and Wales will move to a system where progression is linked to performance, with pay points within the classroom-teacher pay scales being retained only for reference (on the Department for Education website).

For police officers in England and Wales, pay progression has been suspended for two years from 1 April 2012, other than for those on the first three points of the constables' pay scale, and the Winsor review recommended that pay progression should be based on contribution.

What should I do now?

• Read the XpertHR round-up of public-sector pay awards to find details of settlements effective in 2012.
• Check the pay review sector archives to see a breakdown by sector of all pay awards covered by XpertHR pay review update articles.
• Run this search to find articles about the independent public-sector pay review bodies.