Cabinet Office urged to review pay disparities of up to £56,000 for specialist staff

Pay flexibility so departments can recruit and retain staff prompts "workforce issues" and concern about "internal markets", NAO says
PA

The National Audit Office has called on the Cabinet Office to review pay disparities that have meant civil servants working at the same grade in the same function have faced pay disparities reaching as high as £56,000.

The watchdog also called on departments to analyse the effects of pay disparities, which it uncovered in an analysis of departments’ payroll data.

In the most stark case, those in the 90th percentile of project delivery professionals at the top pay band of the senior civil service earned £124,000 in 2018, but those in the 10th percentile earned £68,000 – a difference of £56,000.

Those in the 90th percentile of the digital, data and technology function earned £110,000 – £42,000 more than those in the 10th percentile. For high earners in the commercial function, the difference was £42,000, and for finance, £28,000.

The disparities had arisen because of Treasury guidance that gives functions and departments some flexibility to pay specialised staff more, to improve recruitment and retention.

But the report, which examined specialist skills across government, said the guidance “can lead to workforce management issues”.

“Some departments expressed concerns about ‘internal markets’ for specialist staff in central government and the wider public sector, which they said can lead to higher turnover and ratcheting-up of pay,” the report said.

It said some action had already been taken to address this through SCS pay rules introduced in 2018-19 to address internal pay disparities.

Individual functions have taken steps too. For example, the project delivery function told the watchdog it had introduced a “robust pay exception case process” that, alongside wider changes to civil service pay ranges, aims to address existing disparities.

Several functions have made the case for pay flexibility, including the commercial function, which has raised the pay of senior commercial specialists in the Government Commercial Organisation.

The digital function has meanwhile introduced a pay framework for its six most critical roles, and the finance function uses extra pay allowances to retain senior staff in key roles.

But the NAO said functions and professions should seek to “identify and understand the effects of any disparities” in pay for civil servants in the same functions – and then work with departments to minimise any detrimental effects.

And it said the Cabinet Office should review the issue across all functions, both for senior civil service and lower grades, before discussing with functions how they are addressing pay disparities.

The functional model

The report found the Cabinet Office has set “clear expectations for the performance of functions”, which has become “more established as the means for advancing specialist skills and expertise across government” in recent years.

But it also found some areas where the functional model – the cross-departmental structure for developing critical skills in government, championed by former civil service chief executive Sir John Manzoni – was falling short.

The report noted that functions are in a “unique position” to gather insights from across departments to identify risks, carry out “deep dives” on emerging or older technology, or plan for the end of Private Finance Initiative contracts, among other things.

But it found data gaps and a historic lack of coordination across functions has hampered the functions’ ability to identify those cross-cutting issues.

And departments’ own explanations of how extensively they worked with the functions and embedded them in business planning varied considerably, the NAO said.

The Cabinet Office has been approached for comment.

Responding to a request for comment, the Cabinet Office highlighted civil service chief operating officer and Cabinet Office perm sec Alex Chisholm had pledged to tackle this issue in his speech from Civil Service Live this week.

"With better defined paths to promotion and recognition, colleagues will no longer feel they must switch roles to secure a promotion and higher pay, instead building the deep knowledge and expertise that helps drive continuous improvement," Chisholm said.

"And with redoubled awareness of our need to provide a fully diverse and inclusive working environment - where everybody can give of their best - we can be sure every government policy and action reflects the full range and diversity of thought, from people of every social, educational, and ethnic background."

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