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All work and no pay

9 March 2012
"A culture of bumper pay and perks has no place in local government especially during these tough times across the public sector " said Grant Shapps in August 2011 and words similar to these have been used on numerous occasions since, in what can be seen as the Coalition Governments war against excessive senior-level pay in local government. The culmination of these efforts is Chapter 8, Part 1 of the Localism Act 2011 and the accompanying guidance published in late February 2012.

Sections 38 to 43 of the 2011 Act require relevant authorities, as set out in section 43(1), to prepare a pay policy statement each financial year, the first of which is to be prepared and approved before the end of 31 March 2012. The Act itself sets out the main requirements of pay policy statements and the guidance gives more of the principles and reasoning behind them.

The policy must be passed by full council or a meeting of members. This is one of the underpinning rationale of the Government: all members having to vote on their authoritys pay policy statement will encourage more debate and therefore accountability in relation to the pay of chief officers and the lowest paid employees and how that relates to the pay of the other officers.

In so far as the pay statement relates to chief officers (which is defined as heads of the authorities paid service; monitoring officers; statutory chief officers; non-statutory chief officers and deputy chief officers), it must include not just their salaries but also elements such as performance related payment, benefits in kind, bonuses, increases in pension entitlement and any amounts payable on the chief officer ceasing to hold office or be employed by the authority (e.g. redundancy or severance payments). It is some of these payments that have caused the most concern with politicians in the past. The guidance states that members must be offered the opportunity to vote before a new appointment where the salary package is over £100,000, and therefore this mechanism needs to be set out in the pay policy statement as well.

The 2011 act and the guidance recognise that during the year, an authority may need to deviate from its agreed statement if it is necessary to offer a different package when recruiting a chief officer. However, to do this the authority must take a revised pay policy statement to full council or a meeting of members and ask that they approve it. It could relate to a single position or to a more general change in the authoritys policy.

In order to further promote transparency, any statement relating to remuneration of chief officers must be published in such a manner as the authority thinks fit but, as a minimum, it must be published on the authoritys website.

While it is often perceived that the pay of some chief officers is very high, it was pointed out during the debating stage of the Localism Bill that, of people earning over £150,000, more than 90 work in the private sector and that some of the increase in chief officer pay has been as a reaction to this. So will the production of pay policy statements produce the outcome that the Government wants, to effectively cap executive pay and severance packages within the public sector, or will it have the effect of reducing the attractiveness of chief officer positions and therefore the quality of management?

The answer is likely to be both. The 2011 act is likely to have an effect on reducing chief officers packages given that that it will be at the forefront of an authoritys mind when voting on the pay policy statement along with their accountability to the tax-payer for it. Private companies are under no obligation to publish their directors remuneration packages but public companies are. Whilst those coming from or to quoted companies will have experience of the details of their remuneration being published, those working or thinking of working in the private sector may well decide that they dont want their pay slips scrutinised or to run the risk of their benefits being less than pre-2011 act requirements and either stay away from or move out of the public sector.

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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