Hutton review of fair pay in the public sector

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15 / 3 / 2011 2.32pm

The review was commissioned by the Prime Minister and the Chancellor in June 2010, to make recommendations on promoting pay fairness in the public sector by tackling disparities between the lowest and the highest paid in public sector organisations.

This final report, makes recommendations for a new settlement for public sector leadership. Under this deal, senior public servants’ pay will be directly linked to their performance and will be explained transparently to the public.

The Fair Pay Review has abandoned the idea of applying a 20:1 ratio cap on executive pay in the public sector on the grounds that this would be inoperable across a diverse public sector workforce – people at the top of large and complex organisations, but with low paid workers, could earn less than people running simpler bodies but whose bottom workers were better paid. The Review also found that currently a 20 to 1 maximum multiple would impact as few as 70 senior managers.

The overall approach of the review may be summarised as:

“A delicate balance must be struck between defending the attractiveness of public service careers while ensuring taxpayers can be confident that public money is being wisely used. A framework for senior pay is required that is understood by both citizens and public servants to be fair, and to guarantee that public servants’ pay is duly deserved for contributions that citizens value.”

Key recommendations of the review

  • Rather than complying with a cap, organisations delivering public services should track, publish and explain their pay multiples over time. The most appropriate metric for pay dispersion is the multiple of chief executive to median earnings.
  • The Government should commission the senior salaries review body to publish annual fair pay reports, highlighting year-on-year changes and identifying organisations that fail to produce verifiable explanations for their multiples and for any changes.
  • The Government should seriously consider reconfiguring performance pay systems for senior managers to include an element of “earn back” pay. Only if objectives were fully met would executives receive their full basic pay and only if objectives were clearly exceeded would additional awards be made.
  • The Government should establish a system of benchmarks for executive pay in non-departmental public bodies (NDPBs) on the advice of the senior salaries review body (SSRB).
  • All organisations delivering public services should disclose full details of executive remuneration. The Government should establish an online system for comprehensive disclosure of pay data to allow citizens to analyse these data.
  • The greater transparency will allow a more rationale and informed debate on senior public service pay and remove the need for simplistic benchmarks such as the pay of the prime minister.
  • The Review also promotes the idea of “gainsharing” – reconciling the importance of due desert with the reality that outcomes are collectively produced by the whole of an organisation’s workforce.
  • The Review seeks to support and expand the “pipeline” of talent that supplies public service organisations, broadening the talent pool and supporting managers at all stages of their development.
  • It recommends establishing an online recruitment portal for advertising management roles across public services and sees the benefit as a “passport” scheme to open up movement across different areas of public services as well as to and from the private sector.
  • The Review recommends establishing a consistent framework of pay principles based on its Fair Pay Code (included in the report). The Code includes provisions on proportionality in executive pay, the use of variable pay and enhanced disclosure of executive pay and improved pay determination processes including the requirement that organisations delivering public services should include an employee representative on their remuneration committees.

A full copy of the report is available from the  HM Treasury website.

Next steps

The Government will now decide how to respond to the recommendations made in the report.

We will continue to keep you informed of developments in this area through this webpage and through our Workforce bulletin.

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