COMMITTEE FOR FINANCE AND PERSONNEL
COMMITTEE MOTIONS
Senior Civil Service Pay and Bonuses
Committee Letter to the Minister
10 December 2008
Mr Nigel Dodds OBE MP MLA
Minister of Finance and Personnel
Craigantlet Buildings
Stoney Road
BELFAST
BT4 3SX
SENIOR CIVIL SERVICE BONUSES
You will be aware that the Committee has been considering the Senior Civil Service (SCS) bonus scheme in the context of a wider examination of public sector performance in areas such as financial management, project management and sick absence management. Whilst recognising that an effective pay strategy should include a system of performance incentives and rewards, the Committee considers that this needs to be ‘fit for purpose’, robust and transparent. When taking evidence from your officials on the SCS pay award for 2007, the Committee identified a wide range of issues and concerns in this area.
The Committee’s concerns fall under two broad themes: whether the pay and bonus system is effective in driving high performance and in meeting the aims of the NICS SCS Pay Strategy; and whether, in any event, it is appropriate for the NICS to mirror the Whitehall approach to the award of pay and bonuses to senior civil servants.
The aims of the NICS SCS pay strategy are: “to provide better incentives for delivering key results; to give significant rewards to best performers; to encourage continuous improvement; to enable the Service to compete in the market for high quality staff; and to achieve a simple, transparent and efficient pay system”. Following its examination of the evidence to date, the Committee wishes to be sure that these aims are being met effectively and efficiently through the existing pay system, including the design and operation of the bonus scheme.
During the evidence session with your officials on 3 December, members highlighted how key business targets are not being achieved within and across departments and the extent to which there is under performance in areas such as financial forecasting and monitoring, project management and sick absence management. Members questioned whether this reflects under achievement at the level of individual senior officials, and whether a rigorous approach is taken when setting the personal performance objectives of senior officials and when assessing their end-year performance. Members also queried whether the approach taken in 2007 of distributing the bonus awards to the maximum percentage (i.e. 75%) of SCS staff would have the effect of rewarding mediocre and lower-end performance. The pay and bonus arrangements for the grades above SCS, including the permanent secretaries and the Head of NICS were also discussed. In addition, questions were raised around the apparent lack of transparency and independence in the decision making process for awarding bonuses and the potential to demotivate some staff.
Further, the Committee notes that the Senior Salaries Review Body (SSRB) itself has expressed serious concerns about the workings of the bonus scheme based on evidence that it has been divisive and demotivating. The Committee also notes that the Unions (FDA and Prospect) have also claimed that the SCS pay system is failing to meet Government objectives and is no longer ‘fit for purpose’.
On a more fundamental issue, DFP has pointed out that NI generally mirrors the Whitehall pay arrangements for senior civil servants and that the recommendations of the SSRB are applied here for the annual pay awards to the SCS. However, the Committee has noted that, in his recent Review of the Competitiveness of NI, Sir David Varney concluded that the public sector in NI pays more than the private sector and that “there is a particularly high wage differential at more senior civil service levels”. Varney also concluded that it is inefficient for the public sector to pay wages that are higher than necessary and that this puts a check on private sector growth by making the public sector more attractive to senior managers. In highlighting that the Executive has the power to set its own public sector pay, he called for a particular focus to be placed on resolving the wage differential at the senior civil service level and pointed out that “not only should this help assist the private sector to grow, but it would give the Northern Ireland Executive extra resources to invest in other areas in the years ahead.”
In pursuing this issue, the Committee has examined the DFP figures for “Weekly Earning Comparisons (2007) by Grade” (attached). These show that the senior civil servants in NI earn over 22% more than their private sector equivalents. By contrast, in GB the SCS pay is 7.6% below the equivalent management level in the private sector. The attached figures also show that the more junior grades in the NICS (around three quarters of the total), whose pay awards are negotiated locally, “do not enjoy a significant pay premium compared to their private sector equivalents”. The Committee, therefore, believes that there needs to be a rethink regarding the existing approach of mirroring Whitehall pay arrangements in terms of the NICS senior civil servants.
On the basis of the evidence received to date, the Committee recommends that you commission an external review of both the existing SCS pay system and the pay arrangements for the grades above SCS, including the Head of NICS and the permanent secretaries. The review should be fully independent of NICS and should be undertaken expeditiously. It should both evaluate the effectiveness and efficiency of the arrangements for awarding pay and bonuses to these senior NICS grades and assess the suitability of the system to the NI context, particularly in terms of the Executive’s priorities of increasing the performance and efficiency of our public sector and of helping to grow the private sector. If the existing pay arrangements are found to be no longer ‘fit for purpose’, the review should also make recommendations on a bespoke pay system for the NICS grades at SCS and above, which is tailored to our local needs.
Yours sincerely