Pay arrangements for MPA staff

Report: 12
Date: 14 September 2001
By: Clerk

Summary

The MPA needs to develop pay arrangements for its staff, which include some form of objective setting. This will be informed by, but separate from, the annual appraisal/performance management process.

A. Recommendations

That the Human Resources Committee make the following recommendations to the Finance, Planning and Best Value Committee:

1. given its size, the MPA adopts a simple two-band approach which excludes the posts of Clerk and Treasurer;
2. the MPA will base pay increases on the process outlined at paragraphs 7-17;
3. the transitional arrangements detailed in paragraph 18 for the first year are agreed;
4. some form of generic training on performance management and objective setting is provided for managers in the MPA;
5. pay increases for the Clerk and Treasurer will be based upon the process outlined at paragraphs 7-17, but will remain a matter for the Remuneration Sub Committee;
6. the roles, responsibilities and salaries of all MPA staff are compared to pay at the upper quartile for the public sector in London every three years as a benchmarking process; and
7. the broad principles of the pay of Internal Audit Directorate staff outlined in this report be accepted, subject to Hay evaluations being carried out of internal audit jobs, consultation with existing staff transferred under TUPE conditions, and the Treasurer making a more detailed report to the Audit Panel.

B. Supporting information

Background

1. Hay Management Consultants completed a pay and grading review of the MPA secretariat in December 2000. In determining an appropriate market position for MPA staff, it was suggested that the following factors were most relevant:

• High quality staff would be critical if the Authority was to establish itself and play the role foreseen for it in legislation. This would be in the interests of all stakeholders, particularly members and the MPS.
• Relatively few well paid high quality staff would be a preferable option than a larger number of less effective people.
• The MPA is unlikely to be able to provide careers, particularly for more senior staff, although some reference to public sector pay practice would be appropriate.

2, Taking account of these considerations, Hay recommended that the MPA establish a pay policy through which to pay its staff in the upper quartile for the public sector in London. In subsequently recruiting staff, it was broadly at this level that posts were advertised.

3. In terms of the MPA structure, Hay considered the following factors seemed most relevant:

• The MPA is a small organisation.
• Its senior posts, in particular, would be required to work in flexible ways, because of ever changing priorities.
• ‘Boxing’ staff into tight job descriptions would not help achieve the MPA’s objectives.
• The MPA would wish to give staff maximum opportunity to ‘contribute’ at any level and grow into bigger roles where they can.
• The maintenance of an over elaborate structure would be time consuming and costly.
• There is a need to establish a loose sense of where jobs belong in the structure, for the benefit of members, staff of the Metropolitan Police Service, and the individuals themselves.

4. Hay recommended that a balance should be struck between these factors but that any such pay structure should exclude the Clerk and Treasurer positions.

5. Cornwell Affiliates, as an extension of work previously carried out for the MPS Finance Department, have recently completed a short review on behalf of the Treasurer focusing on comparison of current Internal Audit Directorate salaries with the market rates for similar roles. The review found that salary levels for all internal audit staff were well below market levels. In order to retain existing staff and recruit new staff to fill the vacancies, currently running at 30% of the budgeted establishment, it is clear higher salaries are needed. The full internal audit programme, which directly supports the Authority’s responsibility for the financial integrity of the MPS, cannot otherwise be achieved even with the buying-in of additional from external firms at significantly higher cost.

6. In order to ensure consistency, Hay Management Consultants have been asked conduct a similar evaluations for the Internal Audit Directorate as they conducted for staff in the Secretariat. The aim will be to ensure that staff in the Internal Audit Directorate are paid a salary that is commensurate with salaries in the Secretariat, i.e. upper quartile for the public sector in London, and is sufficient to recruit and retain good quality, qualified staff.

Proposals for the way forward

7. It should be possible to use a simple structure with broad pay bands for an organisation the size of the MPA. Broad pay bands of 100% (i.e. the highest point in each band is at least twice as high as the lowest point) are being introduced in private and public sector organisations, e.g. Hampshire County Council, BOC, Belfast City Council, News International, Prudential, Kimberley-Clark, Trillium etc. TfL are also looking at it. It is a response to the leaner approach to employment, which has seen delayering, flattening of management structures, abolition of grading structures and the need for more flexible, responsive and accountable staffing.

8. In the MPA Secretariat it is probably preferable to adopt the two band approach rather than tightly defined pay spines for each post such as used in local authorities or ‘grouping’ posts within constituent ‘families’, e.g. consultation and diversity, HR and professional standards, where there are only 2-3 posts.

9. In the Internal Audit Directorate, there is a much more clearly defined career structure for auditors and some form of salary range within role is probably appropriate. It is suggested for each auditor role in the Internal Audit Directorate there is a salary range as follows:

10. It is suggested the two broad pay bands within which MPA Secretariat and Internal Audit Directorate staff should be defined as follows:

• Deputy Treasurer, Communications Director, Policy and Process leaders, Senior Auditors to Director of Internal Audit (£30-70k)
• Professional, Admin and Secretarial Support, Auditors and Trainee Auditors (£15.0-35k)

11. The majority of the current Internal Audit staff transferred to the MPA, from the employment of the Receiver, under TUPE conditions. Changes will therefore need to be the subject of consultation. It will also be necessary to establish appropriate arrangements for assimilation of all existing staff on to the revised pay ranges. Following consultation, the Treasurer will be taking a more detailed report to the Audit Panel on 19th September 2001 with a view to then advertising the current vacancies at the new pay ranges.. A further report on progress with implementation of changes in Internal Audit Directorate will be made to the Human Resources Committee at its next meeting.

12. The pay progression process outlined in the following paragraphs is intended to reflect the findings of the Hay and Cornwell Affiliates reports. Given any new organisation or system, costs are likely to be higher in the first few years as salaries must be attractive enough to recruit high quality candidates. Thereafter costs will be easier to control if the pay bill is properly managed.

13. In order to ensure that the overall increase in the pay bill is controlled it would be prudent to introduce a limit of no more than 7.0% of the pay budget to provide a ‘pot’ of money from which such performance related pay (PRP) increases are met. For example, if the budget was £1.5 million per year, the total value of all PRP increases could not exceed £105,000 (7.0%). If it appeared this figure would be exceeded, PRP increases would have to be scaled back to remain within an overall increase of 7.0%. This percentage could be the subject of review every three years as part of the proposed benchmarking process. Using this system with a 7.0% ceiling would enable the good performers to attract a competitive pay increase and so maintain their overall salary within the upper quartile of the public sector, whilst providing a fair reward for good quality staff.

14. It is recommended that all staff receive a ‘cost of living’ pay increase based on the Retail Price Index (RPI) (all items) in April of each year. This increase was 1.8% this year. This will not be part of the formal pay progression framework since anyone receiving just the RPI increase will effectively ‘stand still’ in pay terms.

15. The pay progression framework will be based entirely upon a PRP system. Each individual will be set SMART objectives (see Appendix 1) for the next twelve months requiring delivery of improved performance against MPA or local objectives / standards. The twelve-month period would commence on the date the individual joined the MPA and the anniversary of that date thereafter. The framework would focus on the gathering and recording of evidence and the alignment of individual objectives with organisational or local goals. The emphasis would be on service delivery and business objectives.

16. Under this framework, staff will receive a PRP increase based upon a percentage of the individual’s salary. The maximum percentage would be 7.0%. This maximum percentage will not be regarded as the norm but will only be awarded to those staff that demonstrate that they are highly effective in achieving objectives and consistently demonstrating the full range of competences. (To provide a comparison with the proposed figure of 7%, the seasonally adjusted whole economy average earnings growth to April 2001 was 5.2%. This is based upon pay increases in four employment sectors - public, manufacturing, service and private - provided by the Office for National Statistics. The opportunity for an above average increase will potentially keep salaries of top performers in the upper quartile of the public sector in London.) Fifty per cent of the increase will be consolidated into pay and pensionable whilst the other fifty per cent will be non-consolidated. This will ensure that staff will strive to maintain a high performance every year in order to attract the highest year-on-year salary.

17. The percentage of the PRP increase awarded will depend upon an assessment by the reporting officer and countersigning officer of the level of performance and the extent to which individuals met their objectives. A PRP increase will only be paid if the reporting officer and countersigning officer are satisfied that it is appropriate. Worked examples are attached at Appendix 2.

18. The cost of living increase and PRP increase (if appropriate) will be payable from 1 July each year since the RPI (all items) and seasonally adjusted whole economy average earnings growth figures are not available until two months after the month to which they refer, i.e. April data is not available until June. The payments would be made in 12 equal instalments rather than a lump sum to encourage staff retention.

19. This year there will be a need for some form of transitional arrangements for staff in terms of both the cost of living increase and the PRP increase (if appropriate), since some staff have been working for the Authority since last October. A proportionate increase could be made in respect of the cost of living increase. In addition, line managers could be asked to make an objective assessment of the proportion of any PRP increase that should be paid based upon length of service and overall performance. The increases would be based upon figures of 1.8% and 7.0% respectively.

20. There will also be the need for some form of generic training for line managers on performance management and objective setting.

C. Financial implications

The increase in the pay bill in any one year will be limited to the RPI figure and a PRP increase of no more than 7.0% of the total pay bill. There will also be a training cost for line managers.

D. Background papers

• MPA support structure (paper to Human Resources Committee 21 December 2000)

E. Contact details

The author of this report is Alan Johnson

For information contact:

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

Appendix 1: Workplan

A workplan constitutes a record of what objectives have been set and how they have been met. It is essential that in completing the workplan, the reporting officer uses plain English and avoids jargon and abbreviations that are only familiar to those who know the work.

The workplan must be completed at the start of the year and be an integral part of the review process, where reporting officers and jobholders will be expected to record specific evidence in support of achieving objectives and demonstration of competences. If this process is carried out properly, end of year action should simply focus on a short summary of the evidence already recorded at the review stages. The workplan is a living document and updating in this way should make the process simpler.

The following parts of the workplan should be agreed between the jobholder and reporting officer at the start of the reporting year or upon taking up a new post, or whenever there is a change of duties:

• Job purpose (should be summarised in one sentence)
• Objectives (ideally no more than 4)
• Key measures of performance
• Related competences (in priority order)

Setting objectives

Objectives should be set from the date the individual joined the MPA and the anniversary of that date thereafter or on taking up a new post or whenever there is a change of duties. This must be recorded on the workplan. Unless jobholders move during the course of the reporting year, it is recommended that they should have between 4 to 6 objectives, but ideally no more than 4. It is expected that all reporting officers should have a management objective that includes equal opportunities.

Objectives should:

• link to the MPA’s objectives. An individual's objectives should reflect how they contribute to the objectives of the team;
• focus on outcomes and the most important 3 or 4 measures of performance;
• reflect reasonable expectations of the jobholder;
• support continuous improvement;
• reflect the balance between the needs of the job and the ability, experience and needs of the jobholder;
• be set in line with equal opportunities.

Reviewing objectives

Reviews of objectives are a fundamental part of the arrangements. Following reviews, the workplan should be updated to record the evidence generated to date in order to minimise the work required at the end of the year. The jobholder and reporting officer should have at least two formal reviews during the reporting year (including the end of year review). Two-way feedback throughout the reporting year is essential.

Reporting officers have a responsibility to ensure they discuss performance with jobholders and that reviews take place, but jobholders should formally request a review if this is not happening. Jobholders can request a formal review at any time during the reporting year and the reporting officer can likewise instigate reviews for those they report on.

When recording evidence on the workplan, this should be written in the same way as it would be after the end of year review. If necessary, any agreed action should be recorded so that the jobholder and reporting officer are clear about this.

Key areas to cover in reviews should include:

• progress against agreed objectives;
• progress against demonstration of the competences;
• amending existing objectives or adding new ones.

The workplan should provide space to comment on the achievement of objectives and the demonstration of competences. These parts of the workplan should be completed on a rolling basis, as a minimum at the mid year review stage. The evidence presented should address the following key questions:

Evidence

• what was the result/outcome?
• how well was the objective achieved?
• mwhat relevant factors had an impact on the achievement of the objective?

Demonstration of Competences

• what were the situations in which the competency behaviour was demonstrated?
• who else was involved?
• what did the jobholder actually do (their specific role)?
• what key issues arose and how were they handled?
• what were the outcomes of their behaviour?
• how often were these competency behaviours demonstrated?

Providing the workplan has been regularly reviewed, finalising it should be relatively straightforward. The jobholder's performance should be determined by reviewing:

• what the jobholder has been asked to do (objectives)
• what has been achieved in respect of those objectives
• how the jobholder did this (what competences were used and how well they were demonstrated)

In addition, the reporting officer should consider whether there are any other factors that need to be taken into account. Some examples might include:

• performance in achieving the objectives and/or the competences required to do the job went beyond the normal requirements;
• external factors that were outside the jobholder's control may have made the objective more difficult to achieve;
• the objectives were met, but the jobholder has acted in a way that has adversely impacted on their own or other's performance or the achievement of objectives;
• jobholders who have contributed to objectives beyond the achievement of their own.

Appeals

If, exceptionally, the job holder and reporting officer are unable to resolve a disagreement on the assessment of how well the objectives have been met, the jobholder should request an interview with the countersigning officer within 15 working days of the disagreement arising.

The countersigning officer should interview the jobholder as soon as practicable and attempt to resolve the disagreement. In the event of continuing disagreement or if there is no countersigning officer, there will be an appeals panel consisting of the Clerk, Treasurer and Director of Internal Audit. The Chair of the Human Resources Committee will be an ex-officio member.

The appeals panel will be the final stage in the process. It’s purpose is to ensure that reporting and countersigning officers' judgments are consistent and fair. In the event of the jobholder contesting their assessment, the panel will be asked to:

• assess for quality the content, consistency and standard of the objectives set;
• ensure the assessment of the objectives does not contain any biased or unfair comments;
• ensure reporting and countersigning officers' judgments, relative to others, are consistent, fair and supported by evidence.

Specifically, the panel should consider:

Objectives
Did the agreed objectives:

• support continuous improvement?
• meet the appropriate standards?; and
• reflect the balance between the needs of the job and the ability, experience and needs of the jobholder?

Outcomes
Do the reporting and countersigning officer's comments:

• contain sufficient detail to describe how effectively the jobholder completed his or her objectives?
• provide enough evidence of how the jobholder has demonstrated the agreed competences and to what standard?
• support the assessment made or are there inconsistencies?
• contain any references to the jobholder's background or circumstances that may be inappropriate or discriminatory?

If there is lack evidence in any of these areas, or they contain any inappropriate comments or references, then the appeals panel should return the assessment to the reporting officer, via the relevant countersigning officer if appropriate, and ask him or her to take appropriate action. The panel chair should provide written guidance on what action is required.

Appendix 2: Worked example of pay progression

Worked example of pay progression II

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