Treasury guidance sets out details of civil service pay cap ‘flexibility’

Policy for 2017-18 also sets out latest steps taken to end progression pay in Whitehall

By Richard Johnstone

25 Apr 2017

Departments will still require Treasury approval to increase wages by more than 1%, according to the latest civil service pay guidance, and must show that any pay rises address specific recruitment and retention issues.

The guidance, published on Friday for the 2017-18 financial year, the Treasury said all departments and their sponsored bodies are expected to implement the policy that public sector pay awards will be limited to an average of up to 1% for 2017-18.

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However, the finance ministry said it would continue to consider requests from departments for “flexibility to address specific recruitment and retention pressures” by increasing pay above the 1% limit that has been in place since 2012.

Reasons for these requests could include specialist pay requirements for specific functions, the guidance stated.

As well as seeking Treasury approval for any exceptions, departments will need to re-allocate funding within their overall paybill from its performance pay pot to fund targeted recruitment and retention incentives, which is subject to a 0.5% increase in the total wage bill.

Cases for flexibility made by departments will be judged on whether there is evidence of “exceptional recruitment and retention needs which will be addressed in a targeted way”, as well as ensuring the money transferred is not more than 50% of the performance related pay pot.

Two pay deals breaching the 1% pay cap have been agreed in the last year, covering surveyors and specialist staff at the Maritime and Coastguard Agency, and at the Department for Work and Pensions.

Senior civil servants and their equivalents at non-departmental public bodies are not included within the civil service pay guidance. However, the document says senior staff “have an important leadership role in demonstrating the need for pay decisions to follow public sector pay policy”. Therefore, any annual pay increase or decision to award performance-related pay to such staff must be considered alongside and according to the same principles as the pay remit of the rest of the organisation.

The guidance stated that departments should not enter into formal negotiations with trades unions until their remit has been agreed by the relevant secretary of state, and if necessary the Treasury. It is not government policy to reopen pay remits once they have been agreed at this level, and any “significant deviations” made in negotiations with unions need to reported to the secretary of state, or Treasury as appropriate.

The guidance also set out details of the government’s progression pay reform, which was announced in the 2015 Budget and is intended to remove any remaining entitlement to contractual progression pay in the civil service workforce.

All departments with progression pay have now submitted proposals to Treasury and the majority have completed reforms in accordance with business cases approved by the chief secretary, the guidance stated. Departments must now ensure that their pay arrangements do not involve automatic time served progression pay, or create an entitlement for employees to receive automatic increments.

Responding to the publication of the guidance, Garry Graham, the deputy general secretary of the Prospect trade union, said the Treasury’s "cut-and-paste approach to pay" ignored fundamental changes in the needs of government.

"The civil service needs to recruit, retain and motivate highly skilled people capable of delivering Brexit, major infrastructure projects and other policy initiatives," he said.

“But since 2013 pay rates in the private sector have been significantly outpacing those in the public sector. The living standards of our civil service members have fallen by 15-20% in the past seven years and the service is at its smallest since 1939."

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