Dave Penman: Lessons from HMRC’s groundbreaking pay deal

The new pay package from HMRC shows a department that is setting the pace in pay and reward for civil servants. Other departments should hurry to catch up

By Dave Penman

12 Feb 2021

In many ways I probably wouldn’t be here writing this if John Major’s Conservative government hadn’t developed its pay delegation strategy in the early 90s. I got my first step up the union ladder when I was selected for a role in supporting the unions (five at that time) in the Department of Social Security as they prepared for the introduction of pay delegation.

I left my role as counter manager at Cumbernauld Benefits Agency, one I absolutely loved, for my first full-time trade union role on secondment. I was soon immersed in job evaluation, progression arrangements (or lack of them) and reviews of every pay element you can think of from London weighting to shift premia. When, two years later, I got my first job working for a union, in what is now PCS, it was dealing with the impact of full pay delegation on the agencies and NDPBs in Scotland. Oh, the joys of job evaluating Royal Parks Constabulary officers, whilst trying to protect allowances for having a shotgun at home for our members in Scottish Natural Heritage.

A few years later I moved to London and started work at the FDA. 21 years later and it's fair to say I’ve seen almost everything pay delegation has had to throw at civil servants. Delegation was intended to provide flexibility for employers to tailor their pay arrangements to their very different needs. The reality, however, has been very different. Increasingly pay delegation simply became a tool of Treasury control, with little scope for genuine divergence before pay restraint became the default.

Reward strategy, which should drive organisational and behavioural change, has been relegated to an afterthought by the power dynamic of Whitehall, with complete disinterest from a succession of ministers whose concern for civil service pay was limited to the signal it sends elsewhere in the economy. In almost three decades, there have only been a handful of pay settlements that have set the pace across the service.

HMRC’s pay offer for 2020-23, in this context, is truly groundbreaking. It follows a path that DWP trod a couple of years ago and, driven by changing business needs, seeks flexibility over hours of operation in exchange for a higher pay award. It also harmonises a number of terms and conditions as well as helping to significantly improve progression times to the max of the range. No deal can be all things to all people, certainly not in an organisation the size of HMRC. There are quid pro quos on annual leave and working patterns, but the scope and ambition of the deal is a testament to the drive, commitment and skill of negotiators on both sides of the table and was almost two years in the making.

With most of the civil service suffering in a pay freeze, many will be looking at the pay rises on offer over the three years of this deal, which includes 2021. The truly groundbreaking elements, however, lie elsewhere.

For the first time, grade 6s and 7s in HMRC will not only have a contractual right to flexitime, but also to take up to 28 days flexi-leave a year. Long working hours have blighted the civil service for decades. For too long it has been accepted by employers that the culture of excessive hours is just a biproduct of being at a senior grade. Our latest survey, conducted at the end of last year, showed that over 40% of respondents were working at least an extra 6 hours, every week, unpaid. Less than half were required to record their hours, over two-thirds thought excessive hours was a problem in their organisation, and three-quarters reported it affecting their wellbeing.

The deal also embeds what we’ve learned from the last 12 months on remote working, with a commitment to at least two days a week home-working where this is suitable for the role. Whilst many departments will be similarly looking at hard-wiring greater flexibility, HMRC’s signal of intent and commitment to staff will help pave the way.

The doubling of paid paternity leave to four weeks, plus a range of other family-friendly policies, delivers a total reward package focussing as much on the non-pay rewards as it does on the cash.

Whether 2021 is simply a pay pause or the start of a pay freeze, employers across the civil service should be looking to see how they can improve the total package available to staff. The lockdown has, for many, reignited the demand for a greater work-life balance. There should be nothing to stop civil service employers understanding the value of this to employees and delivering practical and meaningful commitments when cash reward is restrained.

Many of these will already be in the gift of departments without the need for Treasury/Cabinet Office approval. What would be truly groundbreaking though, is greater flexibility in this year's civil service pay guidance over elements that come with little or no direct cost.

In a year when the civil service has been at the forefront of the government's response to the health and economic emergencies, and despite the restrictions on cash reward, this could be a tangible recognition from ministers for all that incredible work. Surely that would something worthy of applause.

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