Contents
Report 6 of the 01 Nov 01 meeting of the Human Resources Committee and discusses the annual pay award for MPS civil staff.
Warning: This is archived material and may be out of date. The Metropolitan Police Authority has been replaced by the Mayor's Office for Policing and Crime (MOPC).
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MPS civil staff pay and the pay and grading review
Report: 06
Date: 1 November 2001
By: Commissioner
Summary
This paper brings the Committee up to date in relation to the annual pay award for MPS civil staff and seeks agreement to proceed with changes arising from the pay and grading review.
A. Recommendations
That:
- Members note the outcome of the annual pay award of 3.5% on basic pay, which took effect from 1 July 2001 for industrial staff and from 1 August 2001 for non-industrial staff.
- Members agree the changes recommended by the pay and grading review, approved by the MPS Management Board, which will move MPS civil staff towards the median of London Public Sector Pay.
- Members note the additional funds needed in 2002/03 and, subject to discussion of the £5m budget bid at the MPA Authority meeting on 25 October, agree that the requirement for full year costs in 2003/04 and future years be reflected in the medium term financial forecast.
B. Supporting information
Annual pay award
1. The MPS Personnel Department negotiates the annual pay award with the trade unions in two separate groups, one for industrial staff (with a pay settlement date of 1 July) and the other for non-industrial staff (with a settlement date of 1 August). Hitherto, the negotiating remit was based on the amount provided for pay increases in the pay budget and (for non-industrial staff) any additional "recyclable" element, which might have been available. This element came from the non-consolidated bonuses paid to staff in the preceding year and from staff turnover whereby higher paid staff leaving the MPS are, generally, replaced by lower paid recruits.
2. For 2001, the Head of Finance advised that there was no recyclable element available. All pay had been devolved to business groups and units and it was assumed that any balance had been made available for other purposes within those groups and units. The additional amount available for the pay awards, therefore, was limited to the 3% increase in the pay budget, which had been allowed as part of the MPS's funding for 2001/02.
3. Pay negotiations were complicated by the concurrent work being undertaken in respect of pay and grading following the award by the MPA of an additional £22.2 million for improvements in civil staff pay. Whilst Personnel Department considered that 3% was not likely to find favour with the trade unions, it was decided to commence negotiations on the basis that the pay award would be an interim settlement pending the outcome of the pay and grading review.
4. The trade unions accepted that there were benefits in settling the pay award as quickly as possible so as not to complicate matters when the pay and grading review was implemented. Although seeking substantially more than the MPS negotiators were able or prepared to offer, the trade unions settled for an award which management accepted could be deemed to be an interim settlement.
5. The settlement reached was a 3.5% increase on basic pay. This translated into 3.1% on the paybill because other parts of the total paybill, e.g. location allowance, market-related allowances, and various skills allowances, were not increased. The 0.1% above the 3% budget comes to around £250k and will be found from within the balance of £22.2m referred to earlier.
6.In settling at 3.5% on basic pay, the MPS negotiators were conscious of similar settlements to police officers and local authority staff. It was clear that anything less than 3.5% would have been unacceptable to the trade unions, even on an interim basis.
7. The pay award was paid to staff at the end of September 2001.
Pay and grading review
8. At its meeting on 19 April 2001, the HR Committee approved a number of recommendations aimed at improving civil staff pay. Changes to location allowance rates and zones were backdated to 1 April 2001. For the longer term, a comprehensive job evaluation exercise was commissioned to provide a framework for revised pay and grading structure. Consultants from Hay Group assisted Personnel Department in this exercise.
9. Around 250 jobs, covering all grades from grade 6 to industrial grades, were analysed by a team of MPS analysts, trained by Hay. Job descriptions were produced to a standard format; the job descriptions were agreed by the jobholders and their line managers. Evaluation panels scored the job descriptions, using the Hay methodology for job evaluation. A consultant from Hay sat with the panels to provide guidance and assistance and to ensure a consistency of approach. Both analysts and evaluators included nominees from the trade unions.
10. Based on the evaluations, its extensive knowledge of pay markets in relation to equivalent job scores and its initial review (reported to the HR Committee on 19 April), Hay presented a number of findings and recommendations to Management Board on 3 October 2001.
11. The main findings were:
- many roles are big for their grade with some jobs in the wrong grade
- many frontline jobs are worth more than the current structure allows
- some jobs are over graded
- generally pay lags behind the public sector market overall, despite the improvements in location allowance and the pay award.
12. The principal recommendations were:
- introduction of an incrementally based pay structure
- fewer senior pay bands but one additional at first line manager level
- pay to be increased to move towards the London Public Sector Median
- if necessary, separate pay scales for some specific groups
- seven new pay bands.
13. Management Board accepted the recommendations. Personnel Department is now charged with their implementation. A number of actions will take place in parallel but of primary importance is the need to negotiate with the trade unions the substantial changes we are seeking to introduce. In view of the time scales involved, these negotiations have already commenced, on the understanding that this Committee was due to consider this report subsequently.
Costs
14. The full year cost of introducing the proposed pay and grading structure is estimated at £15m. Of the £22.2m provided in the 2001/02 budget for improvements to civil staff pay, approximately £10m has already been committed to increases in location allowance, the balance required for the 3.5% pay award (see paragraph 5); and fees to Hay Group. The residual £12m is available to fund the proposal. This implies that the changes in pay and grading can be implemented with effect from 1 August 2001, i.e. the £12m is sufficient to cover the increased pay commitments in this financial year, including implementation costs.
15. There is a requirement for 2002/03 to identify an additional £3m to reach the £15m full year cost. This forms the first part of the 'unavoidable commitments' tranche of the 2002/03 budget bid for civil staff pay.
16. The introduction of an incrementally based pay structure will inevitably lead to increased costs, especially in the first few years, as staff move up the incremental ladder. New staff will be coming in at the minimum of the scale but not all retiring staff will have reached the maximum. In due course, costs of incremental progression will be funded largely from the "churn" of staff turnover. Hay has estimated that this cost would be about 2% per annum in the early years. Based on the elements of the paybill directly affected (i.e. base pay, overtime, shift allowance and employers' National Insurance contributions), it would be in the region of £5m in a full year. For 2002/03, because 1 August would be the annual date for increment increases, the requirement for additional funds would be approximately £3m. This forms the final part of the 'unavoidable commitments' tranche of the 2002/03 budget bid for civil staff pay.
17. The improvements we are seeking to introduce now will move MPS civil staff towards the median of London Public Sector pay.
Summary
18. The Committee is invited to:
- approve the recommendations of the pay and grading review and authorise the Commissioner to continue with their implementation
- note the likelihood for increased costs in the short term of £5m in a full year as a result of implementing an incrementally based pay structure
- to agree to support the case in the medium term financial forecast 2003-06, to be considered by the Finance Planning and Best Value Committee in June 2002, for an additional £5m in 2003/04 and future years to fund the completion of the pay and grading scheme implementation and the part year effect of first anniversary increment increases
- note the move of MPS civil staff towards the median of London Public Sector pay.
C. Financial implications
Existing budgetary provision is sufficient to fund implementation of the scheme in the current financial year, given a commencement date of 1 August.
For 2002/03, the full year effect of the total cost of the scheme (£15m) will require an additional £3m of funding to be identified. This forms part of a budget bid for next year.
Additionally, and for most likely the next three years, funding will also be required to meet the costs arising from the annual round of increment increases. Given that the anniversary date is 1 August, the part year effect in 2002/03 is approximately £3m. Further out (post 2006-07) it is assumed that the scheme is self-funding with increment increases being funded by staff turnover whereby new staff join the organisation at lower scale position than those leaving.
A budget bid for £5m to provide funds for these two issues next year has been put forward through the Mayor/GLA budget process for 2002/03, due to be considered on 25 October by the MPA Authority Meeting. In the event that additional funds are not made available, these unavoidable costs will need to be found from budget reductions elsewhere within the existing budget.
The requirement for additional costs of the full year effects in 2003/04 and future years will be reflected in the medium term financial forecast (2003/06) due to be considered by the Finance, Planning and Best Value Committee in June 2002.
D. Background papers
E. Contact details
The author of this report is Alistair Thompson, MPS.
For information contact:
MPA general: 020 7202 0202
Media enquiries: 020 7202 0217/18
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