Public sector pay in 2010: median award is pay freeze

A combination of difficult economic conditions and the successive Governments' restraint on public sector pay in 2010 saw the median basic award in the sector fall to a pay freeze.

On this page:
Coalition Government marks further pay restraint for the public sector
Pay outlook: pay freeze for 2011 and beyond
2010 pay round
Chart 1: Pay review pattern - public and private sectors, December 2009 to December 2010
Local government
Opted-out councils
Fire service
Police
Review of police pay
Armed forces
Central government departments
Implementing the civil service pay freeze
Civil Service Compensation Scheme
Prison service
Schoolteachers
Future work for the School Teachers' Review Body
School support staff
Higher education
Further education
Sixth-form colleges
NHS
Pay in the NHS in 2011
Future pay in the NHS
Review of fair pay in the public sector
Review of public sector pensions
Additional resources on XpertHR.

The scene for the 2010 public sector bargaining round was set by the then Labour Government at the end of 2009, with announcements that it intended to freeze the pay of senior public service workers and cap basic pay awards for the rest of the sector at 1%, with the exception of the armed forces and those already in multi-year deals. The Government's evidence to the pay review bodies followed this approach, as did the Civil Service Pay Guidance for 2010/11 published in December 2009. The Government also asked the Review Body on Senior Salaries (SSRB) to lead a review into senior pay in the public sector because of concerns about high pay levels in some parts of the sector.

Several of the groups covered by the pay review bodies had agreed three-year deals in 2008, so the final stages of these awards became effective in 2010. These included staff covered by the NHS Pay Review Body (NHSPRB) and the School Teachers' Review Body (STRB), as well as police officers whose pay is determined by the Police Negotiating Board (PNB). These groups were excluded from the Labour Government's pay cap, as were staff in government departments - including the Ministry of Defence, the Ministry of Justice, HM Revenue and Customs and the Department of Health - that were covered by existing multi-year deals. The pay increase due in April 2010 for staff covered by the NHSPRB was confirmed in December 2009, but the awards for those covered by the STRB and the PNB were not due to come into effect until September 2010.

The pay review body reports for the groups outside long-term deals (the SSRB, the Review Body on Doctors' and Dentists' Remuneration (DDRB), the Prison Service Pay Review Body and the Armed Forces' Pay Review Body) were published on 10 March 2010. Their recommendations followed government policy fairly closely, although the SSRB and DDRB cast doubt on the Government's argument that pay restraint by senior staff would affect behaviour by other groups in the wider economy. Most of the recommendations were accepted by the then Labour Government.

All of these announcements were framed by the knowledge that a general election would be held in the first half of 2010, with the focus for the political parties on the economy and the inevitable cuts in public spending.

Coalition Government marks further pay restraint for the public sector

On 6 April 2010, the then Prime Minister Gordon Brown announced that the general election would be held on 6 May. The Conservative-Liberal Democrat coalition Government formed following the election signalled the start of an even tougher era for public sector pay.

Prime Minister David Cameron announced that, at the first meeting of the new coalition Cabinet, ministers had agreed to a 5% pay cut and a pay freeze for the remainder of the Parliament. This was swiftly followed by the announcement that the budget for bonuses (on the Cabinet Office website) for senior civil service and senior NHS managers for 2010/11 would be cut and bonuses would be restricted to the top 25% of performers. An emergency Budget was announced for 22 June.

The coalition document published on 20 May 2010 set out a range of plans that would affect public sector pay:

• a fair pay review in the public sector to look at implementing the "20-times multiple";
• a commitment to transparency, requiring public bodies to publish the salary and job titles of those paid more than pay band 1 of the senior civil service scale, together with "organograms" showing all positions in public bodies;
• a requirement for anyone paid more than the Prime Minister to have their salary signed off by the Treasury;
• reform of the national pay and conditions for teachers, to give schools the freedom to pay good teachers more, and deal with poor performance, along with reform of the school system;
• a review of the terms and conditions for police officers;
• a renegotiation of the GP contract and introduction of a new dentistry contract;
• establishment of an independent commission to review the affordability of public sector pensions, and consultation on changing the final-salary pension for MPs;
• making it easier to reward the best civil servants and remove the least effective;
• a reform of the Civil Service Compensation Scheme bringing it into line with practice in the private sector; and
• the introduction of arrangements to protect those on low incomes from the effect of public sector pay constraint.

The remainder of the 2010 pay round was, therefore, conducted with a Government determined to push through cuts in public spending and bring reform to all areas of the public sector including pay.

Brendan Barber, general secretary of the TUC, told XpertHR: "2010 was the year when pay settlements in the public sector got really tough. Local government employers imposed a pay freeze and pay rises throughout the rest of the public sector fell below the private sector towards the end of the year. These workers will find it hard to stomach a pay freeze in 2011 if inflation stays above 4%."

Pay outlook: pay freeze for 2011 and beyond

The Budget on 22 June 2010 set out plans for a two-year pay freeze in the public sector from 2011/12 for all those earning above £21,000 per year. Those earning £21,000 or below would have a pay rise in each of these years of at least £250. However, any civil servants that had not yet agreed a pay deal for 2010/11 would start their two-year freeze immediately. On the same date, it was confirmed that the final stage of the award for those under the STRB remit would be honoured from 1 September 2010. All the review body groups will therefore be subject to a pay freeze in 2011.

As well as the measures on pay, the coalition Government announced spending cuts that will result in hundreds of thousands of job losses. The public sector is, therefore, facing a long period of severe pay restraint, while inflation is forecast to remain high throughout 2011. This will be coupled with increases in pension contributions for public sector workers and lower retirement benefits.

So, while unions will look for pay awards that go some way to matching the cost of living, they will also be fighting to protect jobs, pensions, and terms and conditions as national pay bargaining is put under pressure. Barber told XpertHR: "2011 looks set to be a bleak year for the public sector, with staff rightly fearful about their pay, pensions and jobs. The year has started with around 100,000 council workers at risk of redundancy - unions will be fighting hard for every job.

"The forthcoming public sector pay freeze and rise in pension contributions, at a time when inflation is sticking stubbornly above 4%, means a harsh real-terms pay cut that will squeeze the incomes of public servants and their families."

Dave Prentis, general secretary of Unison, agrees, saying: "The pay of public sector workers has come under attack from this Government from the time it took office. Given that the vast majority of public sector workers are women, many already low paid, the effect on them and their families is particularly harsh."

2010 pay round

XpertHR collected information on the pay of 94 bargaining groups in the public sector with effective dates in the year to the end of December 2010, together covering more than 5 million employees. Bargaining groups range from the 1.4 million employees covered by the NHSPRB to local authorities employing several hundred staff. Among these awards, 79 provide for a basic increase. Pay for the remaining bargaining groups is either based on individual performance, or in a handful of cases the duration of the award is not known so cannot accurately be recorded.

Among the 79 basic awards in the public sector, the median increase was a pay freeze. This median figure has fallen steadily over the course of 2010 from the 2% median award recorded in the year to December 2009 (see chart 1). The figure held firm at 2% in each rolling 12-month period until April, when the median dropped to 1% and the lower quartile fell to nil. The lower quartile has remained at nil in each rolling year since, while the median continued to fall, reaching nil for the year to September and each subsequent 12-month period.

This chart requires the Adobe Flash Player plug-in.

Over the same period the private sector has seen the opposite change in fortunes - in the year to December 2009 the private sector median pay award was 0.6%, but rose to 1.5% in the year to December 2010. With the spending cuts starting to bite in 2011, and a pay freeze for many public sector workers in the coming year, there seems little prospect of a recovery for pay awards in the public sector. In contrast, private sector respondents to the XpertHR pay prospects survey predicted a median 2% pay increase in the year to August 2011.

See the summary of pay awards in the public sector collected by XpertHR.

Local government

The 2010 pay round for local government workers in England, Wales and Northern Ireland was over almost before it had begun. The three trade unions - Unison, Unite and the GMB - representing 1.4 million services workers on the National Joint Council (NJC) for Local Government Services had put in a claim for what they described as a "modest" increase of the greater of 2.5% or £500 per year from the 1 April 2010 review date. In response, in January 2010 the employers' side said that it was unable to offer any increase in basic pay for 2010/11 because of the difficult financial situation facing councils. Employers also said that they would not be able to offer increases to council chief executives, chief officers, craftworkers or those covered by the National Joint Council for Workshops for the Blind, although none of these groups had submitted a pay claim.

The unions said they were outraged by the threat of a pay freeze, but were unable to persuade the employers' side to engage in negotiations despite registering a formal dispute in July. This dispute was over issues including the failure to make a pay offer and the failure to apply an increase of £250 to lower-paid workers in line with the Government's budget announcement. The employers would not agree to arbitration on pay, stating that their position would not change. The same line was taken with the other local government groups including chief officers and craftworkers, while chief executives did not seek a rise for 2010.

Local government pay for 2011/12 will be the subject of negotiations in the NJC, and in October 2010 the trade union side of the NJC submitted a claim for an increase of at least £250 on all spinal column points. At the time of writing, no formal response had been made by the employers.

In Scotland, negotiations were far more protracted. The trade union side of the Scottish Joint Council put in a claim for an increase of the greater of 3% or £600 from 1 April 2010 following expiry of a two-year award. The employers' side - the Confederation of Scottish Local Authorities (Cosla) - responded by proposing a three-year deal, with a final offer of 1% in 2010, nil in 2011, and 0.5% as the final stage in 2012. The unions recommended rejection of the offer. In August, Cosla imposed a three-year award that was less generous than the final offer, which it stated the unions had formally rejected. The unions claimed that they had wanted to continue discussions, and were angry at the imposed deal - with an increase of 0.65% backdated to April 2010, followed by two years of pay freezes. However, the employers' side has not changed its position on the pay award for 2010, although it expects the unions to revisit the question of pay for 2011. Craftworkers in Scotland had the same deal imposed.

Chief officers and chief executives in Scotland were covered by the final stage of a three-year pay award in 2010, which provided for a 2.5% increase. Although chief executives declined to take the award, it was accepted by chief officers.

Opted-out councils

XpertHR has collected details of 31 pay awards at local authorities that have opted out of national bargaining. Some of these councils had previously agreed long-term awards that would have covered 2010, but these were changed in view of the Government's announcements on pay and budget cuts. Rother District Council, for example, replaced the second year of a three-year pay deal with a 12-month pay freeze, and at Tandridge District Council staff voted to forgo the second stage of a 27-month award, instead accepting a pay freeze. Many other councils froze pay, in a few cases for longer than 12 months. Among these is Surrey County Council, which, in addition to a two-year freeze on basic pay, has also frozen progression and bonus payments for 2010.

Among those councils that did pay an across-the-board increase, most were set at 0.5%. Others chose either to award an increase only to the lowest paid, or to pay a flat-rate or non-consolidated increase. These awards are summarised in the 2010 pay review archive.

Fire service

The pay for brigade managers is usually reviewed annually on 1 January. In November 2009, the Association of Principal Fire Officers (APFO) advised the employers' side of the National Joint Council that this group would not be seeking a national wage settlement for 2010 in view of financial pressures in the public sector. Under the two-track approach to pay, there is scope for pay to be reviewed at a local level, and the APFO expressed the hope that individual authorities would be able to reward staff at the lower end of industry average pay.

Firefighters and control staff have a review date of 1 July. In May 2010, the unions made a claim for an increase to all pay points in line with the figure for retail prices index inflation for May 2010, resulting in a claim for an across-the-board rise of 5.1%. The employers' side responded after the emergency Budget in June, saying that in view of the difficult economic climate and Government cuts in public expenditure they would not be making a pay offer. The Fire Brigades Union negotiated changes to protected pay points to avoid earnings being reduced in 2010, but stated that "this agreement does not imply agreement to a 0% increase for 2010", although the employers have not changed their position on this.

Police

Police officers and support staff went into 2010 covered by the final stages of various three-year pay deals that started in 2008. The award for police officers was agreed by the PNB, with the final increase of 2.55% due to be paid from 1 September 2010. Following the general election, the new Home Secretary Theresa May addressed the Police Federation Conference in May, confirming that the coalition Government would honour the final stage of the award for police officers, while stressing that the police would have to bear a fair share of the burden of cutting the budget deficit, with the Government carrying out a full review of police terms and conditions.

Most police support staff and police community support officers (PCSOs) in England and Wales have their pay negotiated by the Police Staff Council, and May told the National Policing Conference in June (on the Home Office website) that the Government would stand by the deal for police staff. However, she added: "Police officers and staff need to be ready, along with the rest of the public sector, to make sacrifices and accept pay restraint."

The pay of support staff and PCSOs covered by the Police Staff Council increased by 2.58% from 1 September 2010 in the final stage of their pay award. Metropolitan Police support staff and PCSOs have a separate pay agreement, which increased basic pay by 2.575% from 1 August 2010, again in the final stage of a three-year deal.

In Scotland, police staff had also agreed a long-term deal, which increased salary points by 2.1% from 1 September.

Review of police pay

The review of police pay and conditions in England and Wales was launched by the Home Office in October 2010. It is expected to report on short-term improvements by February 2011, and on longer-term reform by June 2011. One of the key objectives is to "provide remuneration and conditions of service that are fair to, and reasonable for, both the taxpayer and police officers and staff".

Armed forces

The Armed Forces' Pay Review Body (AFPRB) covers members of the armed forces at or below the rank of brigadier and equivalent. This group was excluded from the then Labour Government's pay cap, and the Government accepted the review body's recommendations of an increase of 2% in military pay from 1 April 2010. The senior members of the armed forces are under the remit of the SSRB. While the review body did not believe a general pay increase was necessary, it recommended that its pay scale restructuring programme should be completed and the lowest step of the bottom pay scale be removed. The Government accepted the recommendations, which were implemented from 1 April 2010.

Central government departments

The Civil Service Pay Guidance for 2010/11 was published by the then Labour Government in December 2009. Following the election, the Treasury announced as part of its savings measures that civil service recruitment would be frozen for the rest of 2010/11 and any organisations covered by the pay guidance that had not yet agreed a deal for 2010/11 would have to have their remit approved by the Chief Secretary to the Treasury (on the Treasury website).

The Budget in June 2010 announced a pay freeze for the public sector starting in 2011 except for those earning £21,000 or less, who would receive an increase of at least £250 per year. However, civil servants who had not yet agreed a legally binding pay deal for 2010 would start their freeze a year earlier. This meant that those departments in long-term deals would have the 2010 stage of the award honoured - these included departments such as the Ministry of Defence, the Ministry of Justice, and HM Revenue and Customs. However, other departments, including the Home Office and the Department for Work and Pensions, had to implement a pay freeze from their review dates in 2010.

Implementing the civil service pay freeze

Guidance from the Cabinet Office clarified how the freeze should be implemented. This specified that the threshold was for full-time equivalent earnings of £21,000, and that skills or location allowances should be included in addition to base pay. However, the Treasury guidance given to the pay review bodies (Microsoft Word format, 20K) (on the Office of Manpower Economics website) is different, stating: "The £21,000 is based on the normal interpretation of basic salary and does not include overtime or any regular payments such as London weighting, recruitment or retention premia or other allowances."

The Cabinet Office guidance also instructed that progression payments should be paid where these are a contractual entitlement, regardless of whether or not an employee earns more than £21,000, although the Cabinet Office had to be consulted if this was the case. This issue has proved problematic in several departments, including the Department for Business, Innovation and Skills (BIS). BIS had been intending to harmonise the pay systems of the staff that created it from the Department for Business, Enterprise and Regulatory Reform (BERR) and the Department for Innovation, Universities and Skills (DIUS). However, legal advice was that progression arrangements for former BERR staff were contractual while those for former DIUS staff were not, so the two groups have had the pay freeze implemented in different ways.

The guidance also says that the pot for non-consolidated payments should be frozen at current levels, with payments reflecting performance in 2009/10 to be made as planned and further guidance on future performance payments to follow.

The announcement of a pay freeze in 2010 meant that negotiations in many departments were delayed while employers and trade unions sought legal advice about which payments were contractual. This has caused conflict in departments such as the Department for the Environment, Food and Rural Affairs, where, at the time of writing, discussions were ongoing about the status of progression payments, and the Home Office, where the non-consolidated element of progression has not been paid despite the unions believing this to be contractual.

Several large departments have now concluded negotiations and implemented the pay freeze. Among these is the Department for Work and Pensions, which has not paid progression increases but instead has paid flat-rate increases of between £400 and £540 for those earning £21,000 or less. Unsatisfactory performers earning below the threshold have not received the increase. Non-consolidated performance awards have also been paid.

Other departments, such as the Department for Transport, have paid progression increases to all staff, ensuring that staff earning £21,000 or less receive at least a £250 rise. The awards are summarised in the 2010 pay review archive.

Beth Lamont, head of the pay unit at PCS, told XpertHR: "The 2010 pay round was dominated by the Government's pay freeze announcement, which meant there were no negotiations, but instead discussion took place around implementing the freeze. The civil service has already seen several years of pay restraint, and even the £250 minimum payment for lower-paid staff is well below inflation, so civil servants are again having their pay cut in real terms.

"We are also concerned that progression payments in the civil service are treated differently than elsewhere in the public sector and parts of the private sector, where they are contractual and funded separately from cost-of-living increases - we have seen progression as well as the cost-of-living increase frozen. We also have evidence that performance pay is discriminatory in some departments, and we would like to see this put back into consolidated pay.

"The PCS would like to see a more consistent pay system across the civil service and the number of bargaining units reduced. It would be logical and more efficient to centralise pay at least at department level. The diversity of pay systems makes it difficult for staff to be moved to other civil service jobs to avoid redundancy.

"We would like to use the duration of the pay freeze to work with the Government on a better pay system to be introduced across the civil service when the pay freeze ends."

Civil Service Compensation Scheme

Following the successful legal challenge by the PCS to changes to the Civil Service Compensation Scheme introduced by the previous Government, the coalition Government introduced the Superannuation Bill in July 2010 to remove the requirement for civil service unions to agree changes to the compensation scheme. The Bill also set out new compensation caps in the event of voluntary and compulsory redundancy that were less generous than those in the agreement that had been overturned, and provided a fall-back should the Government fail to agree a new scheme with the unions. In parallel, discussions were started with the Council of Civil Service Unions on a new compensation scheme. Five of the six unions (excluding the PCS, the largest civil service union) took part in negotiations, and put the new terms to membership ballots. The new terms were accepted by Prospect, the FDA, GMB and Unite. The Superannuation Bill received Royal Assent on 16 December 2010. On 21 December - while the ballots of the two remaining unions, the POA and the PCS, were still open - the new scheme was laid before Parliament which took effect on 22 December, and the caps set out in the Superannuation Act were repealed. Members of both the PCS and the POA unions rejected the changes and are urging the Government to reopen negotiations. The PCS union intends to ask for a judicial review. Details of the new scheme are available on the civil service website.

Prison service

The 2010 Prison Service Pay Review Body report was published by the then Labour Government in March 2010. Most of its recommendations were accepted, with Maria Eagle, then minister of state in the Ministry of Justice, saying: "The award arising from the pay review body's recommendations is consistent with public sector pay as announced in the 2009 Pre-Budget Report." The award increased most pay scale maxima by 1% from 1 April 2010, with the senior officer point increased by 1.5%. The recommendations of a separate report on Northern Ireland, an increase of 1% on basic pay for all grades, were also accepted.

Schoolteachers

In Scotland, the pay of schoolteachers increased by 2.4% in the final stage of a three-year deal from 1 April 2010. The pay of schoolteachers in England and Wales is determined by the STRB, which had recommended a three-year award with the final stage due to be implemented in September 2010. On the day of the emergency Budget, the coalition Government said that it would honour this agreement, so teachers' pay was increased by 2.3% from 1 September, with higher increases in inner London. A separate XpertHR feature examines developments in teachers' pay in more detail.

Future work for the School Teachers' Review Body

For the 2011 report, the Government has asked the STRB for recommendations on:

• implementing the Government's pay freeze for those in its remit group earning £21,000 or less (unqualified teachers); and
• limits on headteachers' pay, in particular limits in line with the salary of the Prime Minister, an idea that Education Secretary Michael Gove proposed and then put on hold in 2010.

The unions have voiced their concern that the review body has not been asked to look at teachers' pay, or at the effect of a pay freeze on recruitment and retention in the profession. They also believe that the review of head teachers' pay should be carried out in the context of a wider review of leadership pay, as Gove himself suggested when the original plan was put on hold.

The review body will be given a separate remit to make recommendations on introducing greater freedoms and flexibilities consistent with the Government's commitment to reduce the rigidity of the existing pay and conditions framework. The Schools White Paper (on the Department for Education website) explains that the Government wants to see schools making more use of existing pay flexibilities and to extend these flexibilities, with a view to the new arrangements being introduced at the end of the two-year pay freeze that starts in September 2011.

School support staff

A new negotiating body for school support staff gained statutory power in January 2010, with a remit to implement a national pay and conditions framework for support staff in maintained schools in England. However, the work of the School Support Staff Negotiating Body (SSSNB) was put on hold following the election, and in October 2010 it was announced that the body would be abolished, because "the SSSNB does not fit well with the Government's priorities for greater deregulation of the pay and conditions arrangements for the school workforce". The support staff will therefore retain their existing pay arrangements, with most covered by the NJC for local government services.

The move was criticised by the unions, with Prentis listing this decision as one of many attacks on public sector pay by the Government: "School support staff had their new negotiating body swept out from under their feet ... and many staff in the public sector are finding their conditions of service, sick pay and holidays under threat - on top of mounting job losses."

Higher education

Pay negotiations were again protracted in the New Joint Negotiating Committee for Higher Education Staff, against the background of the increasingly constrained funding position for the sector. In May 2010, university vice-chancellors were urged by Business Secretary Vince Cable and universities minister David Willets to "apply restraint in all aspects of pay and bonuses". The final offer from the Universities and Colleges Employers Association (UCEA) was a consolidated increase of 0.4%. The unions emphasised their concerns about job security, but UCEA insisted this was a matter for local discussion. At the time of writing, the University and College Union and the Educational Institute of Scotland were in dispute over pay and job security issues, while the GMB, Unison and Unite had formally accepted the 0.4% offer. Talks between UCEA and the unions were ongoing.

Further education

In England, the trade unions put in a claim for an increase of the greater of a 3.5% increase or £1,000 for lecturers, managers and support staff in further education colleges. The Association of Colleges (AoC) proposed a non-consolidated increase of 0.2%, which was rejected by the unions. The AoC then made a final offer of 0.2% consolidated or £50, whichever was the greater, from 1 August 2010. This was accepted by the majority of the unions, and was the final recommendation.

Sixth-form colleges

The pay offer for both teachers and support staff in sixth-form colleges was 0.75% from 1 September 2010. At the time of writing, Unison's support staff members had accepted the offer, while the decision of teaching staff unions had yet to be announced.

NHS

Staff covered by the NHSPRB had the final stage of their three-year deal paid from 1 April 2010. This increased salary scales by 2.25%, with a flat-rate increase of £420 applied to lower spine points. Doctors and dentists are covered by the DDRB. The DDRB recommendations were broadly in line with the Government's pay policy, targeting increases at more junior grades and freezing the pay of consultants and independent contractor general medical and general dental practitioners from 1 April 2010. While most of the recommendations were accepted, in England and Northern Ireland the review body's recommendation of an increase of 1.5% for foundation house officers was reduced to 1%, the same award as made to doctors and dentists below consultant level. In Scotland and Wales, the 1.5% increase was accepted. The pay for "very senior NHS managers" in England covered by the SSRB was frozen.

In August 2010, the coalition Government asked the DDRB to carry out a UK-wide review of the clinical excellence awards and distinction awards paid to consultants, with a view to ensuring that any future system is fair and equitable, as well as providing value for money. The DDRB's recommendations are expected in July 2011.

Pay in the NHS in 2011

Staff in the NHS will be covered by the public sector pay freeze in 2011/12 and 2012/13 and the review bodies have been given remits that reflect this policy. All the staff in the remit group of the DDRB have earnings above the £21,000 threshold so the Department of Health will not require the DDRB to make recommendations on pay uplifts for doctors and dentists, but submitted evidence on recruitment and retention.

The NHSPRB has been asked to make recommendations on the appropriate uplift for staff on salaries of £21,000 or below. The health department's evidence to the review body proposes a flat-rate increase of £250 for all these staff, saying that staff not at the top of their pay scale would also receive incremental pay increases.

In its evidence to the review body, NHS Employers, which represents NHS trusts in England, estimated that incremental increases would add 2% to the paybill of NHS organisations in 2011/12, a cost that it said had been of concern to many employers.

At the end of 2010, NHS Employers and the unions announced that they were in discussions over a proposal from the employers for a national enabling agreement that would allow local organisations to agree to freeze incremental progression for all staff for the duration of the two-year pay freeze in return for a guarantee of no compulsory redundancies for as many staff as possible. For staff covered by Agenda for Change, there would be a guarantee of no compulsory redundancies for staff in pay bands 1 to 6 while pay progression was suspended, with priority being given to the avoidance of any compulsory redundancy for all other staff. Where local circumstances allow, employers would be encouraged to extend the guarantee to other staff.

For medical and dental staff, there would be a commitment to maintain training opportunities for junior doctors and dentists for the two-year period. Employers would agree to "make best endeavours" to protect consultant doctors and dentists from compulsory redundancy, and guarantee that the level of local investment in clinical excellence awards would not be reduced. Maintaining the national levels of the awards would be subject to agreement by the secretary of state.

The document also proposes that the possibility of deferring increases in employees' contributions to the NHS pensions scheme for the duration of the agreement be explored with the Treasury.

The chairman of the British Medical Association (BMA) council, Dr Hamish Meldrum, said: "The so-called guarantees that are being offered in return for a freeze on contractual increments appear to be very limited and will be left to local agreement. We will consider the details of the NHS Employers' proposal but we are extremely concerned that it seems hitting staff pay yet further is the only offer on the table."

In January 2011, unions including Unison, the BMA, the Royal College of Nursing and the GMB announced that they had rejected the proposals. Mike Jackson, Unison's senior national officer for health, said: "The service group executive said today that they could not support a further pay freeze for nurses, paramedics and other low paid, mainly women workers.

"The funding gap in the NHS is so great that members were sceptical that trusts would abide by a no compulsory redundancy agreement for two years.

"Additionally they felt that the offer was divisive because it excluded high level clinicians, such as matrons, senior occupational therapists and midwife supervisors."

NHS Employers said: "This proposal (PDF format, 33K) (on the NHS Employers website) is still on the table. We hope the unions will reflect collectively on its value and the fact that their decision to reject it will result in more redundancies and job losses than would otherwise be the case."

Future pay in the NHS

The outlook for pay bargaining in the NHS looks very uncertain. In July, the coalition Government set out its long-term plans for the future of the NHS in a White Paper "Equity and excellence: Liberating the NHS", which looked at both short-term and longer-term arrangements for pay-setting. In the short term, staff in the NHS will be covered by the two-year pay freeze from 2011. In the longer term, the White Paper included plans for all NHS trusts to become foundation trusts with the ability to determine pay for their own staff. In response, Unison said: "The White Paper proposes the end of national pay bargaining and an undermining of the NHS Pay Review Body", and launched an unsuccessful attempt to mount a legal challenge over the Government's failure to consult on the plans.

Following consultation on the White Paper, in December 2010 the Government outlined the next steps in its reforms of the NHS (on the Department of Health website). On pay, the Government acknowledged that many respondents, including the BMA and Unison, had been opposed to a move away from nationally negotiated terms and conditions. The consultation also highlighted concern over the future role of the pay review bodies. The document says that it is not the Government's intention to abandon the national pay frameworks, but it envisages employers "taking the lead on negotiating changes to those national frameworks". It states that employers that want to move away from the national systems will need to ensure that they implement a fair and objective system to avoid equal pay challenges. The Government has said it will hold discussions with the staff side and employers over the appropriate approach to national pay frameworks after the two-year pay freeze ends.

Review of fair pay in the public sector

The interim report of the Hutton review of fair pay in the public sector (on the Personnel Today website) was published on 1 December 2010. Launching the report, Will Hutton, leading the review, said: "Whilst the public sector needs better governance and transparency, this alone will not be enough. A comprehensive framework for fairness would also include disclosure requirements based on a pay multiple; better use of performance pay; and a renewed emphasis on ensuring labour markets for executives are properly competitive." The report concluded: "Fair pay is pay that is due desert: proportional reward for an individual's contribution, supported by fair process."

Hutton proposed a framework for fairness in senior remuneration that included, but went further than, the code of practice on senior pay that formed part of the SSRB's interim report into senior pay commissioned by the previous Government. While he said a pay multiple had much to recommend it, the ratio would need to be carefully defined. Recommendations on a framework for fairness will be set out in the final report, due to be published in March 2011.

Review of public sector pensions

The interim report of the Independent Public Service Pensions Commission was published in October 2010. In the spending review statement on 20 October, the Chancellor welcomed the findings of the report and said that he hoped it would form the basis of a new pension deal. He said that the Government would await the final recommendations of the commission before making a decision on the form of future benefit provision and level of contributions required. The final report is due to be published before the Budget on 23 March 2011.

This article was written by Rachel Sharp, researcher/writer, pay and benefits.

Additional resources on XpertHR

• Public sector pay review bodies 2010: senior salaries, doctors and dentists XpertHR looks at the pay awards for senior public sector workers including the senior civil service and the judiciary, and the rises for NHS doctors and dentists.
• Public sector pay review bodies 2010: prison service and the armed forces We look at the pay award recommendations by the Prison Service Pay Review Body and the Armed Forces' Pay Review Body.
• Public sector pay 2010: schoolteachers and support staff A round-up of developments in the pay of school staff.
• NHS Pay Review Body: 2.25% increase The final stage of the three-year pay award in detail.
• Annual review of pay trends and prospects for 2010/11 Results of our major survey of private sector employers on pay prospects and review of how basic pay deals weathered the recession.