Public sector HR managers could face difficult times ahead if current debates being played out in the media over potentially radical changes to pay and pensions come to fruition.
Only a day after Deputy Prime Minister Nick Clegg branded public sector pensions “unaffordable”, signalling possible future cuts, and 10 days after Prime Minister David Cameron warned of “difficult decisions” in future on pay, pensions and benefits, the Chartered Institute for Personnel and Development (CIPD) has called for a fundamental overhaul of the lot.
The HR body in its report entitled ‘Coping with Less: Pay and pensions in the public sector’ is advocating greater use of performance-related pay and bonuses “to maximise value for the taxpayer while also driving through substantial public service reform”.
It is recommending that regional pay negotiations be introduced to help recruitment and improve individual staff performance, citing examples where it believes that national pay bargaining has damaged local services.
Therefore, the CIPD suggests that, like their private sector counterparts, public servants should be paid more in certain regions of the UK such as the south west and East Midlands in order to take variations in local labour market conditions and different costs of living in various parts of the country into account.
The body also reiterated its call for a freeze in the overall public sector pay bill rather introduce than a “crude” freeze on individual salaries in order to provide employers with more flexibility to address specific recruitment challenges and reward good performance.
While Charles Cotton, an expert reward advisor at the CIPD, said that pay restraint in the public sector was vital, allowing a ‘snouts in the trough’ portrayal of performance-related pay in the media meant that ministers were tacitly accepting that “poor performance and excellent performance should, fundamentally, be rewarded equally”.
“A refusal to make use of bonuses in the public sector removes one of the most powerful tools the new government has to drive up standards and deliver its many and stretching ambitions for public service reform and improvement,” Cotton said.
Maintaining the status quo, on the other hand, did little to support a meritocracy and could foster mediocrity. “By linking pay far more closely to performance, ministers could find that they are able to get far more bang for the taxpayer buck. Pay is far better used as a carrot than it is as a stick,” Cotton added.
Nonetheless, the idea could be a hard one to sell to staff. Only 36% of public sector workers believe they should be paid based on performance compared with three out of five private sector personnel.
A mere 6% consider that the performance of their organisation is an appropriate factor in determining salaries compared to just over a third of private sector staff, while more than half of public servants feel that cost of living should be a key determinant, with a quarter putting their faith in union-negotiated deals. This compares with 33% and 4% in the private sector respectively.
On the pensions side of the equation, meanwhile, the CIPD called for “urgent” reform to address the report’s figures, which indicate that the taxpayer pays £3.39 for every £1 that each public sector worker contributes to their own pension.
While Cotton acknowledged that there was no overnight solution to the problem, he believed that short-term action was required to share the cost and risk more equitably between employers and employees.
In the short-term, he said, there was a need for a “fundamental examination” of whether public sector pensions actually acted as a magnet for talent or as a performance driver. In the long-term, however, “a shift away from a pay-as-you-go approach towards a far more flexible approach to public sector pensions, more comparable to private sector best practice, will be unavoidable as ministers seek to ensure equity and value for taxpayers”, Cotton said.
But Dave Prentis, general secretary of public services union Unison, warned at a members’ conference yesterday that if the Deputy Prime Minister “comes after our pensions”, then “we will ballot for national strike action”.
“If this government picks a fight with us, then we will be ready for them. Do not underestimate us. We will be fierce defenders of our members and the services they deliver. The government won’t know what hit them,” he said.