NAO hikes pay to stem snowballing staff turnover

But watchdog admits it cannot compete with 8-10% rises being offered by “big four” accountancy firms
Turnover among NAO audit principals hit 22% in recent months. Photo: Chris Batson/Alamy Stock Photo

By Jim Dunton

03 Nov 2022

Public-finance watchdog the National Audit Office has given its staff an in-year pay rise on top of the 2%-3% awarded for the current financial year, in an effort bring escalating departure levels under control.

The organisation, which is independent of government and the civil service, said it had seen turnover among audit principals – the main auditing grade – increase to around 22% in recent months, up from 11.5% in 2020-21 and 17.3% in 2021-22.

Annualised turnover among analysts is currently running at 29%, up from 19.6% in 2020-21, and 20.7% in 2021-22. Over the past two years, the departure rate among trainees has more than doubled to 12.3%.

This morning, NAO head Gareth Davies told parliament’s Public Accounts Commission, which is tasked with overseeing the watchdog’s work, that it implemented an additional in-year 1% pay rise for all staff below audit-manager grade last month.

He said the organisation had seen a reduction in the number of resignations since the increase was announced. But he also acknowledged the NAO could not compete with pay rises of the magnitude being offered the “big four” private-sector accountancy giants.

“We are falling behind,” he said. “What we hear from the firms in their pay and on their prices to us, because that’s a very good direct source of evidence, [is] between 8-10% increases.

“We’re not going to be able to compete with that, hence why we’re working very hard on the rest of our offer to employees.”

Davies told MPs he did not think the level of staff-poaching and pay offers being made by rival accountancy operations was sustainable for those firms – making the current situation a “temporary squeeze”.

“We need to use the tools that we’ve got to respond to that, but we can’t do it all through pay,” he said.

Public Accounts Commission chair Richard Bacon asked Davies whether it was appropriate for the NAO to increase staff pay levels as it had done, when Treasury rules meant the civil service could not.

“Clearly we don’t do this lightly, because I agree with the general rule which is not to pre-empt decisions which are to come,” Davies said.

“We just find ourselves in an extremely unusual position, with double-digit offers being made to our staff by competitors. It was either doing this or watch more of that happen. This felt like a responsible thing to do.

“It’s not responsible for us to be unable to complete our audits and have big delays in our programmes.”

Davies added that the pay rises for NAO staff were coming from savings resulting from the lower payroll expenditure caused by rising resignations.

He said that although the extra 1% rise would be carried over into future years, this would be lower than anticipated cost-of-living rises for public-sector workers.

“Therefore, we’re not jumping the gun,” he said.

The NAO had an average of 911 full-time equivalent staff in 2021-22, according to its most recent annual report and accounts. 

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