EXCL: DWP exploring capability-based pay reform

Department investigates pay models that would help it “grow in the marketplace as a place of choice for employees”
Photo: Blue Train Photography/Alamy Stock Photo

The Department for Work and Pensions is exploring options for a capability-based pay system that it hopes could make it a more attractive employer and help it develop a "more flexible, multi-skilled workforce".

Contract documents reveal DWP is looking into its options for overhauling staff pay, and suggest it could be looking to trial a new system in the near future.

The department has commissioned  management consultancy company Korn Ferry to come up with options for new approaches to pay that use “reward as a lever to achieve workforce shift”.

The research – delivered for a fixed fee of £98,570 – will be a piece of “thought leadership” to find models that “will support the organisation in growing a more flexible, multi-skilled workforce that will support change in how services operate”.

CSW understands the work is currently in the exploratory stages and DWP is looking to understand best practice across the public and other sectors to inform its thinking.

Consultants have been tasked with identifying approaches that would support organisational transformation and enable DWP to “grow in the marketplace as a place of choice for employees”, according to contract documents.

The research will set out options and recommendations on how to assess employees’ capabilities and provide “expert input” on the requirements of a skills assessment tool.

As part of the six-week project, which began in mid-February, Korn Ferry has been asked to make recommendations on how to collect data for a DWP pilot study.

The consultancy – which says it advises clients on how to “reward and motivate their workforce” and to “design optimal organisation structures, roles, and responsibilities” – will also set out a framework to evaluate the approach.

Reform without proper resourcing "worse for morale and skills retention than doing nothing"

The reseach DWP has commissioned is in line with an aim to implement capability-based pay across the civil service – starting with the senior civil service – set out in the Declaration on Government Reform last year.

The Cabinet Office has been working on proposals for what it has called the “government’s main priority for the transformation of the SCS pay system” for several years.

Its proposed plan would see pay for senior officials set according to two assessment frameworks focused on professional skills and leadership. Civil servants would be grouped into three levels – developing, competent, and expert – with corresponding pay bands.

However, plans to roll out the new system were delayed by the public sector pay freeze that was announced in the 2020 autumn budget.

In its submission to the Senior Salaries Review Body early last year, the Cabinet Office said the overall implementation of the new system would not come until at least 2022-23.

In light of the delay, the department said it was considering a pilot of parts of the system, which would include "at minimum" the capability measurement model, in some government departments and professions.

“This would have the benefit of allowing an initial review of the effectiveness of the new capability frameworks and process for measuring capability before any pay structure is applied," the submission to the salary-review body said.

But in October, research commissioned by the government's Office of Manpower Economics concluded that it would be a major mistake to introduce the overhauled system without funding it sufficiently.

The Institute for Government, which carried out the research, said government must commit to spending the £45m that the Cabinet Office had costed the reforms at every year if capability-based pay is to stand a chance of being better than the do-nothing option. Not doing so "would be worse for civil service morale and skills retention than doing nothing at all", it said.

The think tank warned that unless the funding is ringfenced, government decisions could prevent departments from offering staff base pay that matches their demonstrated capability.

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