Proposals for pay progression arrangements in the Metropolitan Police Authority (MPA)

Report: 6
Date: 10 June 2005
By: the Chief Executive and Clerk

Summary

The Human Resources Committee (HRC) considered a report on revised proposals for pay progression arrangements in the MPA. The Committee agreed that in future the Remuneration Sub-Committee should consider the salary increases for the Chief Executive, the Treasurer, the Deputy Chief Executive, the Deputy Treasurer, the Director of Internal Audit and the Director of Communications, the top six posts in the Authority, rather than just the pay of the Chief Executive and Treasurer. The Committee also asked for a further report proposing a specific and costed pay alternative. However, given the financial implications of any decision regarding pay for Authority staff it was felt this Committee should consider the report.

A. Recommendations

Members agree that Authority staff should move to an incremental pay system on the basis of paragraph 9 with effect from 1 July 2005.

B. Supporting information

1. The pay progression arrangements for the MPA were agreed by the HRC in September 2001 and were based upon a report by Hay Management Consultants. This established that high quality staff would be critical if the Authority was to establish itself and play the role foreseen for it in legislation. Taking account of this and related considerations, Hay recommended that the MPA establish a pay policy through which to pay high quality staff by reference to the upper quartile for the public sector in London.

2. HRC adopted the Hay recommended approach and subsequently decided that a performance related pay (PRP) system should be used by the MPA. (PRP is a scheme that relates the award of a pay increase to the results achieved by the individual.)

3. However, it became apparent to the MPA’s SMT members that the current system was not encouraging the skills, behaviours and attributes that the Authority requires. There was a significant level of dissatisfaction with PRP in terms of its appropriateness for this organisation, in terms of measuring individual performance objectively, and concern that it encouraged people to focus narrowly on the quantitative tasks that will earn short-term recognition rather than qualitative tasks that will have longer-term outcomes. Staff and the recognised trade union for MPA staff, the Public and Commercial Services (PCS) union shared these concerns. There is also material evidence from our monitoring over the past two years of disproportionality in performance appraisal markings and the consequent awards for PRP.

5. The recent Audit Commission evaluation found that ‘Staff are talented and motivated tackling complex and challenging policy areas with skill and enthusiasm’ but that there was ‘an inconsistent approach to the delivery of staff appraisals and personal development plans… and a perceived lack of transparency around recruitment, salary and grading issues.’ In other words, what was driving performance on the part of the Authority was the nature of the work and personal commitment rather than financial benefit. An earlier race equality review by Ionann had found. This lack of proactive management … is also observable in the way in which staff performance is managed, with a marked reluctance on the part of some senior managers to deal directly with staff when there are matters of concern relating to performance issues’.

6. Developing the performance management capabilities and culture of the organisation is an on-going and important task. At present, the standard of performance management is not satisfactory across the organisation, and the present linkage between performance and pay exacerbates the problems this causes. Herein lies a dilemma for the Authority. The overall direction and performance achieved depend on the effectiveness of a small number of people who are leading the organisation. A PRP system may be appropriate and equitable in rewarding senior managers according to their contribution to organisational performance and results. This was recognised by the earlier Human Resources Committee meeting which agreed that pay progression for the Chief Executive and Clerk, Deputy Chief Executive and Deputy Clerk, Treasurer and Deputy Treasurer, Director of Internal Audit and Director of Communications should fall to the Remuneration Sub Committee. Previously the Remuneration-Sub Committee had just considered pay progression for the Clerk and Treasurer.

7. However, the MPA is also dependent upon the efficient performance of more than 90 other staff who expect to be paid appropriately for what they do in comparison with others. If they feel that they are being paid less than others who are doing the same or even less demanding work or contributing less effectively, the effects of rewarding a small number of ‘high performers’ will be counter-productive in motivating the majority of staff.

8. If the MPA is to move away from a PRP system, whilst still retaining and developing an effective performance appraisal process for all staff that, as an organisation, we clearly need. The simplest option would be incremental pay progression arrangements. In such a system, jobs that require similar levels of skills, knowledge and experience to achieve their objectives would go into the same pay band. These are normally bands created by placing boundaries between different levels of skills, knowledge and experience leading to a more clearly defined and robust structure. Within each band would be a number of pay steps. As, each year, members of staff increase their knowledge and experience, this is reflected in progression through the pay steps within each band. A performance element could be retained by incremental progression being conditional on satisfactory performance. One of the biggest advantages of incremental pay progression is cost control and forecasting.

9. The Committee are asked to agree the proposal that MPA staff move to an incremental pay system with effect from the start of the pay year on 1 July 2005. The proposed grade structure is set out in Appendix 1. Implementation would be on the basis of staff being assimilated to nearest pay point above their current level of pay in 2005/6 and then Increasing the value of that pay point by 3%. This will ensure all staff, and not just those who benefit from assimilation, will receive a reasonable pay increase (typically 4.9%) this year. The overall cost in the first, and subsequent, years will be more affordable than remaining with a PRP system.

C. Race and equality impact

An incremental pay system, with staff normally starting at the lowest point upon recruitment, treats all staff fairly and equitably. Any decision to start a candidate at a point above the minimum will require a clear explanation from the selection panel and the agreement of the appropriate SMT member. As a result, there will be less opportunity for subjective or disproportionate treatment as most new staff start at the same point and once they reach the top of the pay spine there will only be cost of living increases, i.e. there is no opportunity for pay ‘drift’ to a salary level higher than the value of the job. There will also be transparency around recruitment, salary and grading issues – the concerns identified in the Audit Commission report.

D. Financial implications

A significant level of pay modelling has taken place to identify the most affordable means of pay progression for Authority staff. Using last year’s average cost of Performance Related Pay (PRP) plus 2.5% cost of living increase as a benchmark, the following provides some comparable pay costs over the next three years (2005/6 to 2007/8).

This year that average cost of PRP would almost certainly be higher as the cost of living has increased from 2.5% in April last year to 3.2% in March this year (April figure not available). Nevertheless, the cost of the incremental pay progression arrangements are less than the cost of continuing with PRP and within the budget allocation.

1. Average PRP and cost of living increase (5.14%)

2. Cost of assimilation and 3% increase in pay points July 2005 - £3,060,384

3. Cost moving up one step and 3% increase in pay points July 2006 - £3,248,646

4. Cost of moving up one step and 3% increase in pay points July 2007 - £3,449,749

All these calculations exclude the top six posts whose salary increases fall to be considered by the Remuneration Sub Committee.

Line 1 shows last year’s cost of an average PRP plus cost of living pay increase.

Line 2 shows the effect of assimilating staff to the nearest pay point above their current level of pay in 2005/6 and then increasing the value of that pay point by 3%. This will ensure all staff, and not just those who benefit from assimilation, will receive a pay increase this year.

Line 3 shows the effect of increasing the value of each spine point in 2006/7 by, as an example of a cost of living increase, 3%, and then individual members of staff moving up one spine point.

Line 4 shows the effect of a similar increase in 2007/8.

E. Background papers

• The Bichard Inquiry - update on MPS progress against Bichard Inquiry Recommendations

F. Contact details

Report author: Alan Johnson, Head of Human Resources, MPA.

For more information contact:

MPA general: 020 7202 0202
Media enquiries: 020 7202 0217/18

Appendix 1

Band 7

Some ‘administrative’ roles

16,000
17,259
18,518
19,777
21,036

Band 6

Some ‘administrative’ roles and trainee auditors

21,036
22,019
23,002
23,984
24,967

Band 5

For example, personal assistants, first line managers

24,967
25,716
26,487
27,282
28,100
28,943
29,811

Band 4

For example, Auditors, Community Engagement Facilitators, Partnership Support Officers, Policy Development Officers, Community Engagement Officers, Liaison Officers, Member Support Officers, Committee Administrators, Senior HR Adviser, Press Officer, On Line Communications Manager, Systems Administrator

29,811
30,854
31,934
33,052
34,209
35,406
36,645
37,928

Band 3

Senior Auditors, Senior HR Manager, Management Accountant, Senior Press Officer, Systems Manager, Partnership Development Officer

37,928
39,255
40,629
42,051
43,523
45,046
46,623
48,039

Band 2

Assistant Directors of Internal Audit, Head of Secretariat

48,039
49,480
50,964
52,493
54,068
55,690
57,361
59,082

Band 1

Policy Officers, Deputy Director of Internal Audit

59,082
60,854
62,680
64,560
66,497
68,492
70,547
59,082

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