Duncan Brown asks whether the balance between cost savings and staff engagement is right?
Public sector pay was in the headlines again last week as the government announced a 1 per cent pay rise for public sector workers.
However, 600,000 health workers were excluded from the blanket rise because they receive an automatic increase of 3 per cent annually as part of a salary progression plan. This fixed rise adds 1.5 per cent, or so, to the organisation’s pay bill.
I think the government is not being totally accurate calling the wage rise process "automatic", as any pay rise is subject to performance and competence assessments. Barely 12 months ago employers and trade unions negotiated greater performance flexibility into the process as part of the revised Agenda for Change pay agreement.
But it should come as no surprise that there is reluctance to raise public sector salaries further when the wage bill accounts for half of government’s total non-investment spending (about £180 billion). And that is before you consider the ongoing spending cuts of 18.6 per cent between 2010/11 and 2017/18 that must be implemented.
Yet despite all this budget slashing, average public sector pay levels have stayed relatively constant under the coalition with the majority of spending cuts achieved through job losses.
Even so, the Treasury has made its position clear, saying, "continued pay restraint remains central to the government's deficit reduction strategy. [It] has already helped protect thousands of jobs and frontline services".
And the pay packets of public servants in higher echelons of the sector have not escaped scrutiny. Last week, a House of Commons Communities and Local Government Committee inquiry into chief officers' remuneration heard claims that these employees pocketed overpayments, and continue to do so. The chief executive of the Taxpayers' Alliance didn’t stop there. He went on to say that reward for chief officers lacked any performance-relationship or penalties.
However, I was also giving evidence to MPs at the session and I didn’t entirely agree.
My evidence showed that the public overestimates pay levels in the public sector. The reality is that salaries are significantly less than for equivalent private-sector roles - about half according to the Aon Hewitt pay database information.
A poll by the Guardian newspaper found that 88 per cent of the tax-paying public thought that the 1 per cent pay award for NHS staff was unfair despite the cost implications.
I think the public are probably right. Better care is not just about spending on hospital beds and drugs and CT scanners. It's what engaged NHS staff give you when you walk in through that hospital or medical centre door.
There’s a risk with totally cost-driven pay policies that lead pay to fall behind private sector rates as well as lagging behind inflation. It’s not just that you lose staff or that nurses are forced to take on other (distracting) jobs to make ends meet. It is that you threaten the employee engagement that underpins that critical human-to-human dimension of care. Research shows this engagement is a key component in saving lives and speeding recovery and what is the value of that?
In determining NHS and public sector pay policy, the government needs to investigate the impact of its policy on recruitment, retention and engagement, and the relative effects of workforce quality, workforce size and cuts on public service care quality. Even from a purely financial-perspective, the current policy may be costing them more than they think. What's your view?