Public sector pay policy 2020 to 2021: technical guide

3. Staff Pay Remits

Please note this section should be read in conjunction with sections 1 and 2.

Key pay policy priorities and key metrics for staff pay in 2020-21

What are the key metrics that will be used to assess pay remits?

3.1 The key features of the 2020-21 pay policy is set out in paragraph 1.3. Each remit will be assessed on the following:

• affordability and sustainability - the financial impact of the pay remit proposals
• this includes: the cost of paying progression; any known changes to staffing over the year; as well as any mandatory changes and/or changes outwith the annual pay award (such as an increase in employer's pension contributions) that may create budgetary pressures
• meeting the measures for addressing the lower paid
• application of the increases within the pay thresholds
• the use of paybill savings to address inequalities

What is the limit on the overall increase to the paybill?

3.2 The aim of the policy is to assist public bodies to reach effective pay settlements that help them to fairly reward staff and manage their staffing numbers to deliver services within constrained budgets.

3.3 The pay policy does not set any metric relating to the overall increase in paybill. Each body covered by the policy must ensure that their pay proposals are affordable within their financial settlement for 2020-21.

3.4 The amount a public body can add to its paybill as a result of its pay proposals will be determined by their agreed^[7] financial settlement. Public bodies will need to include the cost of all elements of their proposals to determine the total value of the proposed increase in pay and benefits for staff in the organisation. The public body must confirm the total value of their pay proposals are affordable within their agreed financial settlement. They must also demonstrate, particularly where there are proposed changes to existing pay and grading structures, that their pay proposals are sustainable and that all savings identified to part-fund the proposed award are deliverable.

3.5 It is a matter for individual public bodies and their staff representatives to make decisions on their proposed pay remit and how they will meet the cost within the agreed^[7] financial settlement. Employers and their staff representatives should give consideration to securing productivity improvements and flexibilities to help them afford pay increases while ensuring public services continue to deliver best value for the public purse. Such decisions should take into account the policy requirements while ensuring that there is no detrimental impact to staff and the provision of services. Where there are affordability pressures, the public body must contact their sponsor division and Finance Business Partner at the earliest opportunity to discuss.

3.6 Each public body should send in its staff pay remit proposals in line with the submission date they agreed in advance with the Finance Pay Policy team. If for any reason a public body is unable to meet their agreed submission date it should contact the Finance Pay Policy team (FinancePayPolicy@gov.scot) at the earliest opportunity to discuss an alternative date.

3.7 If a public body submits its staff pay remit proposals after its agreed submission date or is likely to implement its pay award after the recognised settlement date an explanation should be provided. Where appropriate this should include confirmation that staff and their representatives are aware of any delays to the implementation of their pay award.

What are the basic pay increases that a public body can apply?

3.8 For staff whose current full-time equivalent salary is below £80,000, the basic pay award employers must apply is the guaranteed 3 per cent pay increase and this should be applied as the £750 cash underpin for all staff whose current full-time equivalent salary is £25,000 or less. If a public body proposes to award more than this to address evidenced inequalities, the additional cost of applying above the levels guaranteed in the pay policy requires to be met from the 0.5 per cent limit for flexibilities (paragraphs 3.58 to 3.623.62).

3.9 For staff above the Upper Pay Threshold (£80,000), the basic pay award increase must be within the £2,000 cap. It is the responsibility of each organisation to ensure their full paybill costs can be met from within their agreed^[7] budget provision.

What is the position on applying the pay uplift to individuals where a public body has an established policy on pay protection and/or linking pay to performance?

3.10 If a public body has an established policy on pay protection (sometimes known as "red-circled staff") and/or linking pay to performance, this may be taken into account in developing pay proposals and may be used to determine whether or not an individual is entitled to the guaranteed basic pay uplift. Depending upon local arrangements some staff may receive a non-consolidated payment in line with the basic award for other staff in the same grade or for others their pay may be frozen. In all circumstances, the public body would be required to set out the details of their relevant remuneration policies and the number of staff affected in their business case.

Can paybill savings be used to part-fund the pay award?

3.11 Public bodies can use paybill savings to part fund their proposals but such savings should not be used to award pay increases that would otherwise result in the pay proposals exceeding the pay policy limits. Savings include those arising from staff turnover (recyclable savings), reductions in staffing and the removal of allowances or reductions in overtime.

3.12 In addition, public bodies may use paybill savings of up to 0.5 per cent of baseline salaries to make changes to their existing pay and grading structures to address evidenced equality issues or to award higher increases if there is evidence of being a lower paying organisation. For further detail refer to paragraphs 3.58 to 3.623.62.

3.13 Where a public body proposes to part fund any consolidated increase from an in-year non-recurring saving they will be required to confirm that future baseline paybills are affordable.

3.14 The proposals should include confirmation from the public body that they will deliver the specified savings during the period of the proposed remit. Public bodies should provide a risk assessment on their likelihood of achieving the projected savings. The Chief Executive/Accountable Officer will be expected to confirm in the outturn proforma that the proposed savings were delivered.

What costs must be included in the pay remit?

3.15 The pay remit costings must include the cost of all^[8] proposed increases in pay and benefits as well as the consequential increases to allowances, overtime rates, employer's pension and National Insurance contributions that directly relate to the pay remit proposals. This is the Total Increase for Staff in Post of the proposals and reflects the aggregate value of the increases in pay and benefits existing staff will receive.

3.16 The pay remit costings should also include the costs of any changes to existing allowance rates,^[9] the buying-out of existing allowances or the introduction of new allowances that will form part of the negotiations. Changes in overtime rates or proposals for new allowances will only be considered where these can be demonstrated to be cost neutral. If your proposals include any changes to existing terms and conditions you will be expected to consider the impact on the overall remuneration package particularly in regard to delivering the pay policy expectations for the lower paid.

3.17 Proposals which carry a notional cost (such as, for example, changes in the qualifying period for annual leave) must also be included in the remit proforma. There should be a supporting business case which sets out the current arrangements as well as the benefits and the read across for other public bodies. The additional benefit for staff will not add an actual cost to the paybill and will therefore not impact on the Net Paybill Increase. However, if the proposals result in ancillary costs such as additional staffing, overtime or any other staffing costs these costs will require to be included in the remit proforma with confirmation the costs can be met within the agreed budget for the period. Such costs are not required to be included within the pay policy limits (paragraph 3.56).

3.18 The Scottish Government encourages employers to offer assistance with green transport initiatives. Where a public body proposes to introduce such initiatives, the detail should be set out in the business case and the associated costs for setting-up and maintaining the scheme should be included as well as an indication of the value to staff. Such costs are not required to be included within the pay policy limits (paragraph 3.56) although the public body is required to provide confirmation the costs can be accommodated within the agreed budget for the period.

3.19 Proposals to introduce non-pay rewards such as salary sacrifice schemes also fall under this category. As above, the financial proforma should include the administrative costs of setting-up and maintaining any such schemes as well as an estimate of the value to the individual. Public bodies should provide evidence to support any proposals in their business case.

3.20 Salary sacrifice proposals which aim to reduce employees' pension contributions to a public service pension scheme with off-set increases to the employer contribution will not be considered acceptable.

3.21 Once these decisions have been taken, to ensure consistency in assessing individual proposals, the expectation is that each public body should model the paybill costs of their proposed pay award in the following order taking account of any affordability pressures (see paragraph 3.5):

• progression (if proposed)
• applying the real Living Wage as a minimum of annual salary of £17,965
• the guaranteed cash underpin of £750 for staff with a full-time equivalent salary of £25,000 or less
• the guaranteed 3 per cent pay increase for staff earning up to full-time equivalent salary of £80,000
• the pay increase for staff earning above the Upper Pay Threshold (£80,000)
• proposals to access additional flexibilities
• associated increases in the costs of overtime, allowances

Public bodies must also include the employer's pension and National Insurance contributions that result from the increases in pay and benefits that are proposed.

What costs are excluded from the pay remit?

3.22 Any changes to the baseline paybill such as: mandatory increases to the employer's pension and/or National Insurance contributions; or increases related to ensuring the financial health of the pension fund; or any other changes to terms and conditions directly outwith the control of the public body are not to be treated as increases within the annual pay award. Such costs however should be included in the baseline paybill as they help determine overall affordability. Where the actual costs are not known at the time of preparing the remit costings, then an estimate should be provided along with a note of the methodology for the calculation.

3.23 The costs of paying the employer's Apprenticeship Levy should be noted in the pay remit as the cost could have a potential impact on the affordability of the annual pay award.

What are the measures to support lower paid staff?

3.24 Employers covered by the policy are required to:

• pay at least the real Living Wage rate
• ensure all staff with a full-time equivalent salary of £25,000 or less receive the guaranteed cash £750 underpin

Further details are set out below.

What is the policy position on the real Living Wage?

3.25 The policy intention is that the employer of every worker whose pay is controlled directly by the Scottish Government will be paid at least the real Living Wage rate set out in paragraphs 3.27 and 3.28.

3.26 While not a pay policy requirement, public bodies are encouraged, if they have not already done so, to demonstrate their backing of the Scottish Government's commitment to support lower paid staff by becoming Accredited Living Wage employers.

How should the real Living Wage be applied?

3.27 To meet the Scottish Government's commitment to support the real Living Wage, the pay policy expectation is for the real Living Wage to be applied as an annualised rate, referred to as the Scottish Living Wage.

3.28 For 2020-21 pay remits, the Scottish Living Wage is set at an annual gross salary of £17,965.^[10] The calculation for the 2020-21 Scottish Living Wage is based on an hourly rate of £9.30 which is consistent with the real Living Wage rate announced during the 2019 Living Wage week. Therefore public bodies are require to ensure they pay at least £17,965 and that all salaries meet the real living wage rate of £9.30 per hour based on actual working hours. See paragraphs 3.32 and 3.33 for the position for Interns and Modern Apprentices.

3.29 The Scottish Living Wage is the minimum annual full-time equivalent salary for all employees in public bodies covered by the pay policy regardless of the number of conditioned hours worked. Public bodies have the responsibility to ensure that in delivering the annual gross salary of £17,965 that all their salaries meet the statutory hourly rates for the National Living Wage and the National Minimum Wage.

When is the Scottish Living Wage applied?

3.30 All public bodies will be expected to apply the new Scottish Living Wage rate by 1 April 2020 at the latest. Where a public body has just received Living Wage Accreditation^[11] they will be required to apply it from that date

3.31 The cost of applying the uprate should be included in the pay remit proposals based on the 12 month cost (i.e. as if the increase had been applied on the settlement date).

How does the pay policy apply to Modern Apprentices and Interns?

3.32 The pay policy supports the Government's target for Modern Apprentices, recognising the importance of providing opportunities for youth training and employment, and as such it does not provide a barrier to delivering on this. Where a public body takes on a Modern Apprentice in a:

• recognised/existing job role - then the public body is expected to pay them the rate for that grade.
• specific training role - they are expected to pay at least the Scottish Living Wage unless it is the lowest pay point in the existing pay and grading structure and there is a need to create a differential between established roles and the training role. In such circumstances the public body would be expected to pay at least the adult National Minimum Wage rate rather than the statutory Youth Development or Apprentice rates. Where a public body pays a Modern Apprentice at a lower rate than the Scottish Living Wage they would be required to provide details of the rates paid. The public body would be required to pay the Modern Apprentice the established rate for the job on completion of the agreed training period.

3.33 The pay policy does not apply directly to interns who are on short-term, developmental placements. However, public bodies are encouraged to consider best practice when offering an internship particularly if they are in a recognised/existing job role or specific training role as set out in paragraph 3.32 for Modern Apprentices. Where it is appropriate and where they can afford to do so, employers should pay the Scottish Living Wage, particularly where the intern is undertaking a job equivalent to other staff within the organisation.

How should the guaranteed £750 cash underpin be applied?

3.34 The policy requires that employers provide a guaranteed £750 cash underpin to all staff whose current^[12] full-time equivalent base salary is £25,000 or less. The policy expectation is for the guaranteed £750 cash underpin to be applied on a pro-rata basis for all part-time employees. Further detail on the application of the pay policy for part-time employees is set out in paragraphs 2.27, 3.45 to 3.47.

3.35 The policy position is that the guaranteed £750 cash underpin should be consolidated and paid in addition to any progression increase (where eligible). The only exceptions to this being:

• where a public body has an established policy on pay protection (see paragraph 3.10)
• where a public body has an established policy on linking pay to performance (see paragraph 3.10).
• where an existing pay point is aligned to the real Living Wage and the living wage increase on the pay point is less than £750. In such cases the difference may be awarded as a non-consolidated payment.

What is the increase for staff earning below the Upper Pay Threshold (£80,000)?

3.36 The policy intention is that every worker whose current^[13] full-time equivalent base salary earning above £25,000 and below £80,000 should receive a guaranteed 3 per cent basic pay increase. The policy position is that this payment should be in addition to any progression increase (where eligible).

3.37 The policy expects public bodies to apply the guaranteed 3 per cent pay increase as a consolidated basic pay award. The only exceptions to this being:

• where a public body has an established policy on pay protection (see paragraph 3.10)
• where a public body has an established policy on linking pay to performance (see paragraph 3.10).

3.38 Employers can use all or part of the paybill savings allowed in 2020-21 for pay inequalities to provide a basic award increase of more than 3 per cent in order to reduce any gender pay gap and/or the overall pay gap between the highest and lowest earners. This would require to be evidenced, affordable and may be costed from the flexibility allowed in the 2020-21 pay policy to address evidenced equality issues (see paragraphs 3.58 to 3.62).

3.39 While public bodies can identify savings to part-fund their pay award (see paragraphs 3.11 to 3.14) they cannot use any such savings to make a case to exceed the policy limits.

What if a public body proposes to pay more than 3 per cent to staff below the Upper Pay Threshold (£80,000)?

3.40 A public body may propose to apply more than the 3 per cent for lower paid staff to address evidenced equality issues. In such cases, the additional amount above the 3 per cent would require to be costed from the 0.5 per cent flexibility allowed in the 2020-21 pay policy (see paragraphs 3.58 to 3.62).

What is the increase for staff earning above the Upper Pay Threshold (£80,000)?

3.41 The policy limits the basic pay increase for those with a full-time equivalent base salary of £80,000 or more to £2,000. This applies to all pay points which are £80,000 and above.

3.42 The £2,000 is the limit on the increase in base pay. Where an individual is eligible, they may also receive a progression increment in addition to this, if this is proposed for other employees. It is noted all proposed increases will be subject to any established policy a public body has on pay protection and/or linking pay to performance (see paragraph 3.10).

3.43 In determining the level of increase for those staff earning above the Upper Pay Threshold (£80,000), each public body should take in to account the progressive approach set out in this pay policy and what they propose for other staff to ensure that pay inequalities are not exacerbated.

What can a public body do if they have staff whose base pay is currently just above the Upper Pay Threshold (£80,000)?

3.44 A public body may propose to pay a higher increase of up to 3 per cent to staff who are currently on a base salary that is just over the Upper Pay Threshold (£80,000) to address any possible "leapfrogging" and to maintain the integrity of their current pay systems. If less than half of the pay range is above the Upper Pay Threshold (£80,000), the cost of applying the 3 per cent can be included within the costs for those above the Upper Pay Threshold. If more than half of the pay range is above the Upper Pay Threshold (£80,000), the proportion of the cost of applying 3 per cent which is above the £2,000 limit must be included under the costs under the paybill flexibilities.

How should pay increases be applied to part-time employees?

3.45 The policy intention is for all increases to be based on an individual's full-time equivalent salary so that part-time employees will receive all increases on a pro-rata basis. However the pay policy provides flexibility for employers to take their own decisions in this regard. It does not prevent individual employers choosing to submit proposals to pay the same level of increase to all staff regardless of work-pattern to address their own specific circumstances. The additional cost above the policy limits would require to be met from the 0.5 per cent flexibilities (paragraphs 3.58 to 3.62) allowed in the pay policy to address inequalities.

3.46 If the same consolidated monetary increase was paid to all employees regardless of hours worked this could undermine some pay and grading structures. It could also create a legacy of a future higher base salary for some individuals solely as a result of part-time working rather than contribution compared within other employees with the same length of time in post and contribution but have worked full-time. There is also a risk that to pay all staff the same increase regardless of hours worked could undermine working relations between employees.

3.47 This may be better illustrated by the following examples where the full-time and part-time equivalent salaries are above and below £25,000 based on a full-time working week of 37 hours.

Example based on a standard 37 hour working week:

Employee A: works full-time with a salary of £20,000
Employee B: works part-time with a take-home salary of £20,000 (based on a full-time equivalent salary of £ 29,600)
Employee C: works full-time with a salary of £29,600

Employee	Hours worked	Current salary	Current Hourly rate*	Increase	Revised Salary	Revised Annual Salary FTE	Revised Hourly rate*
		£	£	%	£	£	£
A	37	20,000	10.36	£750	20,750	20,750	10.74
B	25	20,000	15.33	£750	20,750	30,710	15.90
C	37	29,600	15.33	3%	30,488	30,488	15.79

*Annual salary divided by hours worked and 52.2 weeks per year

In the above example, both employee A and B have a salary of £20,000 regardless of hours worked, however the full-time employee's current hourly rate is £10.36 compared with the part-time employee of £15.33. Therefore if the part-time employee were to receive a £750 increase, on the basis that their take-home pay was less than £25,000, this would mean that their hourly rate following the pay increase would then be higher than their full-time equivalent co-workers on the same grade and equivalent full-time pay point (£15.90 compared with £15.79).

What is the position on progression?

3.48 Nothing in the policy is intended to interfere with existing pay progression arrangements or to constrain discussions between employers and staff on this issue.

3.49 Where there is no contractual commitment to pay progression, bodies may continue to pay progression if they choose to subject to any established policy they have on pay protection and/or linking pay to performance (see paragraph 3.10). Decisions taken to pay progression should be based on business needs, maintaining headcount and affordability.

3.50 It remains a matter for individual public bodies and their staff representatives to agree a pay settlement that is affordable. However where there are affordability pressures, decisions may be required on whether to cap progression increases or suspend progression in order to maintain headcount and services and meet the policy requirements for lower paid staff within the agreed financial settlement. In taking such decisions, consideration is required to ensure that no direct or indirect discrimination is introduced or perpetuated. In addition, if there is any proposed change to existing progression arrangements, consideration should be given to the impact for future years to ensure the public body is able to meet its equality obligations noting that the pay policy encourages public bodies to continue work towards ensuring maximum journey times are no more than 5 years. Where there are affordability pressures, the public body must contact the Finance Pay Policy team and their sponsor division and Finance Business Partner at the earlies opportunity.

3.51 Where necessary, public bodies must ensure they have sought legal advice as to the extent of contractual obligations in relation to paying progression.

3.52 All proposals to cap or suspend progression will be considered by Remuneration Group. The supporting business case will require to include the rationale for the decision taking into account affordability and legal advice.

3.53 The cost of paying progression under existing arrangements continues to be costed outwith the pay policy limits (see paragraph 3.56) and, as with all pay increases, will require to be met fully from within the agreed budget provision. Where a public body proposes to make a change to existing progression arrangements, such as reducing journey times, the cost of introducing the change should be included within the 0.5 per cent flexibilities allowed to address pay inequalities.

3.54 The cost of progression should be based on a full 12 month cost regardless of whether or not a public body awards increments to staff based on individual anniversary dates. Therefore the cost should not be scaled down to the cost payable within the pay remit period if that is different. Any savings arising from paying staff on individual anniversary dates should take in to account the residual progression costs from the previous year. The savings may be noted for affordability of the pay remit but may not be used to off-set the costs of any proposals which seek to address pay inequalities as detailed in paragraphs 3.58 to 3.62.

What is included within the pay policy limits?

3.55 All increases to pay must be included within the specified policy limits set out for 2020-21 unless they are specifically identified to address evidenced equality issues and it is proposed to seek to use the flexibilities within the pay policy outlined in paragraphs 3.58 to 3.62. Increases within the limits will include:

• the basic award including the specified low pay measures (see paragraph 3.24)
• any costs arising from proposed changes to existing terms and conditions that are not covered by the additional flexibility for addressing equality issues (see paragraph 3.58)
• the cost of any payment to staff on pay protection

What are outwith the pay policy limits?

3.56 The following costs are all outwith the respective pay policy limits for basic pay increases:

• progression
• flexibility to use paybill savings to address inequalities
• introducing assistance with green transport initiatives
• proposals which carry a notional cost (where there is no actual cost to the employer)
• the ancillary increases to allowances, overtime, employer's pension and National Insurance Contributions as a result of the pay proposals

3.57 For costs that are outwith the pay remit refer to paragraphs 3.22 and 3.23.

Does the pay policy provide flexibility for public bodies to use paybill savings to address inequalities?

3.58 Public bodies will be able to use paybill savings of up to an additional 0.5 per cent of baseline salaries, beyond those limits set out above to address any or all of the following:

• considering affordable and sustainable changes to their existing pay and grading structures or terms and conditions to address evidenced equality issues.
• address inequalities arising from recruitment and retention issues.

What is required if a public body is seeking to use paybill savings to address inequalities?

3.59 The following sets out some examples of the types of proposals that public bodies might submit to address inequalities:

• reviewing existing pay and grading structure, including:
  • reducing progression journey times (removing minima and/or recalibrating pay steps)
  • recalibrating existing pay steps
  • reducing and/or removing overlaps between grades
• equalising contractual and working hours.
• removing / changing out-dated allowances.
• changes to wider HR policies, including:
  • increases to maternity, paternity and adoption leave
  • changes to recruitment/promotion policies to encourage greater uptake of individuals with a protected characteristic where they are under-represented in a specific grade or grades.
  • reviewing service related benefits such as reducing the qualifying time for maximum annual leave entitlement
• future-proofing for the real Living Wage and National Living Wage

3.60 To assist public bodies in framing their proposals, the following sets out some guiding principles/benchmarks:

• public bodies should aim to have journey times of no more than 5 years for all grades.
• the proposed changes should not result in terms and conditions becoming more generous than the majority of other public bodies.
• any proposed increases to existing band maxima of more than the limits set out in the 2020-21 pay policy should not result in the band maxima exceeding the median of the equivalent market maxima by more than 5 per cent.
• public bodies should aim to have a qualifying time for maximum annual leave entitlement to be no more than 5 years.

3.61 Where a public body provides clear evidence of equality issues they must demonstrate:

• the cost does not exceed 0.5 per cent of baseline salaries
• the proposals can be evidenced to show a tangible improvement (such as reducing the overall gender pay gap)
• the cost of making the changes can be wholly funded from paybill savings. However, where a public body has difficulty in meeting the full cost from paybill savings, but meets the other criteria outlined, they are invited to contact the Finance Pay Policy team and their sponsor team (where applicable) to discuss options
• a risk assessment of being able to deliver the identified paybill savings
• the proposed changes are sustainable (that they do not create pressure on future baseline paybills).

3.62 See the worked example on using paybill savings to address equality issues (paragraph 3.116).

What is required if a public body submits proposals for amending or restructuring their pay and reward system?

3.63 If a public body is developing proposals that make any changes to their existing pay and grading structure it should take into account the following:

• the wider read across of their proposals for other public bodies
• the policy expectation is that any new pay range maxima should not result in it being more than 5 per cent above the median of the maxima in the relevant labour market. In most instances the expectation is for the relevant labour market to be the other public bodies subject to the public sector pay policy and public bodies should ensure any job evaluation scheme they use enables them to fully utilise this data
• there is no similar expectation for the pay range minima. However, public bodies should ensure that any proposed increases to a pay range minima will not result in paying above the relevant market for that grade or build in future paybill pressures as a result of paying new recruits and/or promotees a higher starting salary
• affordability and sustainability - the changes are affordable and sustainable in the years following the implementation of the restructuring. To demonstrate this public bodies are expected to projected annual progression costs for the 3 years following implementation of the restructuring

3.64 Where a public body is considering proposals which include restructuring their existing pay and grading system they should discuss them with the Finance Pay Policy team at the earliest opportunity.

Can a public body align to another public body's pay proposals or submit joint pay proposals?

3.65 The 2020-21 policy continues to encourage smaller^[14] bodies to consider making a business case to align with another appropriate existing pay system (such as the Scottish Government or another Agency / Non‑Departmental Public Body) which will be referred to as the host public body.

3.66 Thereafter, a brief review of the alignment arrangements should be carried out every three years to ensure it remains fit for purpose and continues to allow the body to recruit, retain and motivate its staff.

3.67 Public bodies wishing to put forward a case to align to another public body's pay system should speak with the Finance Pay Policy team in the first instance and in advance of their 2020-21 settlement date.

3.68 While the alignment arrangements continue to be available only for the smaller public bodies, there is no restriction on larger public bodies seeking to submit joint remit proposals where there are clear business benefits of doing so. Where two or more bodies propose to submit a joint pay remit they should seek early discussions with the Finance Pay Policy team.

What happens if a public body is legally committed to elements of the pay award?

3.69 There may be rare occasions when a public body is contractually obliged to pay progression or where the pay award is legally linked to that of another group of staff (such as local government employees), for example after the transfer of staff or the creation of a new public body. Where this is the case and the commitment is not compatible with meeting the requirements of the pay policy, the public body should set out in its business case: the basis of the contractual obligations; whether or not they have sought legal advice; how it intends to resolve the situation; the potential impact with other employees and the timeframe for its resolution.

3.70 Public bodies should note the basis of approval of pay remits in paragraphs 3.107 to 3.110 and ensure they do not create any new contractual obligations.

Staff pay remit approvals process

What is the pay remit process in 2020-21?

3.71 Pay proposals will be assessed by Finance Pay Policy Team, and where relevant in conjunction with the sponsor team using a risk-based approach to the pay remit process. Based on some key indicators, each public body will be assigned to one of three remit process. The following chart summarises the 2020-21 risk assessment process:

* The Scottish Government's pay proposals require to be approved by Scottish Ministers Analogue bodies will be rated low risk

Low Risk	Fast track process	The public body can go ahead and engage in formal pay negotiations. The public body would then only be required to provide settlement information once the pay award was implemented.
Medium Risk	Streamlined process	The public body can go ahead and work up detailed proposals in conjunction with their Staff Representatives/Trade Unions but would require to seek formal approval prior to concluding formal pay negotiations.
High Risk	Full pay remit process	The public body requires to have their pay proposals considered by the Scottish Government's Remuneration Group prior to engaging in formal negotiations.

3.72 For the purpose of the 2020-21 risk assessment, the rating for the 2020-21 remit will be based on the following criteria:

Green

The 2020-21 remit will be rated Green if both of the following apply:

• the 2019-20 outturn is rated Green.
• the 2020-21 proposals are in line with pay policy and are affordable.

Amber

The 2020-21 remit will be rated as Amber if any of the following apply:

• the 2019-20 outturn is rated either Green or Amber.
• the 2020-21 remit is affordable but includes proposals to use the 0.5 per cent flexibilities to address inequalities which require Remuneration Group consideration.
• the 2020-21 remit includes proposals for restructuring.

Red

The 2020-21 remit will be rated as Red if any of the following applies:

• the 2019-20 outturn is rated Red.
• the 2020-21 remit proposals are outwith pay policy.
• the 2020-21 remit proposals are not affordable.

3.73 This process provides greater autonomy to public bodies and reduces the resources both for public bodies and Scottish Government officials required in the current process. The process also underpins the pay policy expectation for public bodies to actively engage with their staff representatives / Trade Unions as early as possible in the pay round as part of a positive partnership approach to pay negotiations. Regardless of the risk rating the policy expects public bodies and their Trade Unions to have constructive and collaborative pay scoping discussions prior to the public body submitting their outline proposals.

What should a public body provide for the risk assessment of their outline pay proposals?

3.74 All public bodies will be required to complete an assessment proforma in which they are asked to provide:

• 2019-20 Outturn information.
• the 2020-21 baseline position.
• indicative costs for progression and savings.

3.75 Public bodies will also be asked to provide a brief outline of their pay proposals, in particular details of any changes proposed to existing pay and grading structures or terms and conditions to address pay inequalities.

3.76 The sponsor division and Finance Pay Policy team will comment on the outline proposals. It will be the responsibility of the sponsor division to highlight any issues or affordability pressures and along with the Finance Business Partner approve the optimum funding envelope. The Finance Pay Policy team will advise on the risk rating of the proposals and provide guidance, if necessary, to ensure the proposals remain in line with pay policy. This rating will then provide the framework for public bodies to engage in formal pay negotiations with their Staff Representatives/Trade Unions.

How will the outturn be assessed?

3.77 The previous year's outturn information is required be provided as part of the current year's pay proposals. As noted in paragraphs 2.10 to 2.12, it is the responsibility of the Chief Executive or Accounting Officer to confirm the outturn is within the approved remit and the assumptions made in respect of savings to fund the pay award were met.

3.78 The Finance Pay Policy team will rate the outturn for the previous year as follows:

Green

The outturn will be rated as Green if all of the following apply:

• the settlement information for 2019-20 has been provided and confirms the pay award was implemented within the approved remit.
• the outturn is fully in line with the approved remit (it did not exceed the limits of the approved remit; all changes to pay structures were implemented as approved; all conditions placed on approval had been met; and where appropriate, all assumptions about paybill savings are still valid) and this has been confirmed by the Chief Executive.
• any paybill changes are attributable to factors not directly related to the approved remit.

Amber

The outturn will be rated as Amber if any of the following apply:

• the settlement information for 2019-20 has not been provided.
• the outturn exceeded the approved limits and there is insufficient information to determine that any other paybill changes are attributable to factors not directly related to the approved remit and the increase in paybill per head indicates proposals were implemented as approved.
• the savings identified in the approved remit have not been fully realised but were sufficient to cover the costs of implementing any changes to address inequalities.

Red

The outturn will be rated as Red if any of the following apply:

• the implemented pay award differs from the basis of the approved remit.
• the outturn exceeded the approved limits; there is insufficient information to determine that any other paybill changes are attributable to factors not directly related to the approved remit and/or the increase in paybill per head is higher than the approved remit.
• the savings identified in the approved remit have not been fully realised and were insufficient to cover the costs of implementing any changes to address inequalities.
• the public body did not comply with any conditions placed on approval.

3.79 If the outturn is rated as Red, the public body must provide an explanation as to why the outturn was exceeded and the current remit and outturn must be considered by the Remuneration Group.

3.80 Where a public body has exceeded the approved remit and the increase cannot be explained by changes in staffing over the year or has moved away materially from the basis of that remit then the Remuneration Group may refer the outturn and the current remit proposals to Ministers. The Remuneration Group expect Ministers will take action where the explanation is not adequate. The potential consequences of significantly exceeding a remit in such circumstances are set out in paragraphs 3.113 to 3.115.

What is required under the fast-track (Green) process?

3.81 Where a public body has been assigned the fast-track process then the pay remit would be signed off by their Board or Remuneration Committee and they would only be required to submit a settlement proforma once the pay award has been implemented.

What is required under the streamlined (Amber) process?

3.82 Where a public body has been assigned to the streamlined process they would be required to obtain approval to their pay remit proposals prior to concluding formal pay negotiations and implementing the pay award. The pay remit proposals will be rated as set out in paragraph 3.72 and this will determine who approves the pay remit (paragraphs 3.85 to 3.92).

What is required under the full pay remit (Red) process?

3.83 Where a public body has been assigned to the full pay remit process they would be required to submit their pay proposals with the necessary supporting information for approval by the Scottish Government's Remuneration Group prior to engaging in formal pay negotiations. Where the Remuneration Group consider the proposals as novel or have the potential of a wider read-across to other public bodies, they may decide to refer them to Ministers.

What if the proposals have been rated Red?

3.84 If the current remit proposals are rated Red the public body will be required to revise its proposals to bring them in line with public sector pay policy before they can be given further consideration and before they can be submitted for approval.

Who approves the pay remit proposals?

3.85 Ministers have decided some remits may be delegated to be approved by the Scottish Government's Remuneration Group or senior officials depending upon their rating.

Senior Officials

3.86 Senior officials may approve proposals where the current remit is rated Green and the outturn is rated either Amber or Green. All other proposals will be considered by the Remuneration Group who will decide whether they can be approved or need to be brought to the attention of Ministers. This is summarised in the following table:

Outturn	Current remit proposals	Decision
Green or Amber	Green	Senior officials
Red	Green or Amber	Remuneration Group
Green or Amber	Amber	Remuneration Group
Green or Amber or Red	Red	Requires further consideration as Remuneration Group would not be able to approve

3.87 Who approves the remit at senior official level will depend upon whether the public body is a NDPB / Public Corporation, Agency or Associated Department:

Public body	Portfolio approval	Finance approval
NDPB or Public Corporation	Director of the relevant Sponsor Directorate[15]	Director of Budget and Public Spending
Agency	Director General[16] of the relevant Sponsor Directorate
Associated Department	Permanent Secretary

3.88 Senior officials will consider the proposals and on the basis of the information provided will decide whether to approve the proposals or to seek further information or to refer them to Remuneration Group.

Remuneration Group

3.89 All proposals that require Remuneration Group consideration need to have the support of the relevant portfolio senior official.

Public body	Relevant senior official
NDPB/ Public Corporation	Director[15] of the relevant Sponsor Directorate
Agency	Director General[16] of the relevant Sponsor Directorate
Associated Department	Permanent Secretary

3.90 The Remuneration Group will consider the proposals, which will include the Chief Executive's foreword to the business case, the advice from the sponsor team (where applicable), the Finance Business Partner (where applicable), the Finance Pay Policy team and the views of the portfolio senior official. On the basis of this information, the Remuneration Group will decide whether to approve the proposals or to seek further information or to refer them to Ministers.

Ministers

3.91 Examples of proposals that may be referred to Ministers include those where the outturn is rated as red and the Remuneration Group consider the supporting explanation to be inadequate; or where the current remit is novel or contentious; or where the remit is of particular interest to Ministers. Each decision will be made on a case-by-case basis but the Remuneration Group expects to approve most proposals under the delegated approval arrangements. If Ministerial approval is required it will be the approval of the Cabinet Secretary for Finance or Finance Minister and the relevant Portfolio Cabinet Secretary or Minister.

3.92 The pay remit proposals for the Scottish Government's main bargaining unit require to be approved by Ministers regardless of its rating.

How long will approval take?

3.93 If a public body submits its pay proposals to the Finance Pay Policy team in line with their agreed submission date then they will be given priority.

3.94 The following flow chart summarises the expected length of time which will be taken at each stage of the process:

(1) Public bodies are expected to engage with their Trade Unions in preparing their draft proposals prior to submitting their assessment proforma to the Scottish Government.
(2) The Scottish Government's pay proposals will follow the streamlined process. Analogue bodies will be rated low risk.
(3) PB/TUs must inform FPP of any issues arising during pay negotiations which may result in any implemented settlement deviating from the basis of the approved remit.

3.95 Where a public body is required to submit a full pay remit the aim will be to approve these pay remit proposals within 7 weeks.

• this provides for up to 4 weeks for assessing the outturn and remit proposals and resolving queries with the Finance Pay Policy team and sponsor team (where applicable). The aim is to conclude this assessment within a couple of weeks but this will depend upon the complexity of the proposals and the number of other remits submitted to the team at the time. Where possible the Finance Pay Policy team will try and advise on the likely length of time that might be required.
• it will then take up to 3 weeks for the formal approval of proposals. During these 3 weeks, the formal submission will be prepared and submitted to Remuneration Group for approval.

3.96 Please note that if the proposals require to be approved by Ministers then this may take longer than 7 weeks.

3.97 The Remuneration Group meets regularly throughout the year and the dates of meetings in 2020 can be found at: Remuneration Group meeting dates. If the deadline for the submission of papers is missed, the proposals will be put on the agenda of the next available meeting of the Remuneration Group. However, in exceptional circumstances, the submission may be put to the Remuneration Group in correspondence at the agreement of the Remuneration Group Secretariat and / or the Chair.

3.98 To achieve the above timescales, it is important that the proposal each public body submits to the Finance Pay Policy team includes all the necessary information, is submitted on time and the public body responds to any queries raised quickly. If a public body submits its proposals in line with the timetable, the Finance Pay Policy team will aim to provide initial feedback within 5 working days.

How will public bodies be notified of the outcome of the approval process?

3.99 Once the pay proposals have been approved; a letter will be issued to the public body setting out the decision made and where appropriate any requirements or conditions made in respect of that decision. The public body can, if it wishes, request a meeting with Scottish Government officials to discuss the submission and the subsequent decision made.

Who is required to submit a settlement proforma?

3.100 All public bodies are required to complete a settlement proforma to confirm that the implemented settlement is wholly in line with pay policy. This confirmation will form an important part of the process to determine the risk rating for 2021-22 (see paragraph 3.78).

What are public bodies who analogue or align to another public body expected to provide?

3.101 All public bodies which align or analogue to another public body (referred to as the "host public body") are dependent upon the host public body having an agreed settlement before they can determine the impact for their own staff. The public body should discuss the affordability of the host pay award with their sponsor team prior to implementation. If a public body is not able to fully implement the host public body's pay award then they should also discuss with the Finance Pay Policy team.

3.102 Public bodies which align or analogue to another public body are expected to submit a completed settlement proforma once they have implemented the pay settlement. This will confirm that they have implemented the pay award in line with the host public body as well as providing the supporting pay and equalities information.

Staff pay discussions and negotiations

When should a public body engage with its trade union(s)?

3.103 The policy encourages all public bodies to have constructive and collaborative pay discussions with their relevant trade union(s) on the development of their overall pay and reward strategies prior to submitting their assessment proforma and where necessary their remit for formal approval.

3.104 However, while informal discussions can take place, public bodies must not enter into formal negotiations with their trade union(s) until their remit has been formally approved. Trade unions should note that points considered in informal discussions cannot be treated as agreed until the public body's pay remit is approved.

3.105 The approved pay remits sets out the public body's maximum negotiating position within the pay policy limits, taking account of affordability and this will set the parameters for detailed negotiations with their recognised trade union(s).

3.106 If during pay discussions or negotiations any points arise regarding the application of the pay policy, public bodies and / or their Trade Unions are encouraged to speak with the Finance Pay Policy team to seek clarification.

What is the policy on legal commitments?

3.107 Approval of pay remits is on the basis that a public body does not enter into any legally-binding contractual agreements in trade union negotiations that effectively commits it to automatic costs in the future (i.e. beyond the duration of the approved remit).

3.108 All existing legally-binding commitments should take into consideration affordability and potential financial constraints in current and future years. All public bodies are advised to take legal advice on the drafting of pay commitments to ensure these are affordable and consistent with the pay remit process.

Can a public body make changes to its approved remit during negotiations?

3.109 If, during negotiations, a public body is considering: entering into an agreement that exceeds the key pay metric percentages approved in its remit; or deviates from the basis of approval then the public body will need to contact the Finance Pay Policy team in the first instance. The team will advise if the public body requires to revise its proposals and / or seek further approval from the Scottish Government. Changes proposed within the limits approved are a normal part of negotiations and should not need to be referred for further approval unless the Finance Pay Policy team consider them novel or contentious.

3.110 Where a public body proposes to make any changes to its existing pay and grading structure, or any of its terms and conditions, at any time during the year and had not included the detail within the pay remit, they should contact the Finance Pay Policy team to discuss. The team will be able to advise if the changes require formal approval from the Scottish Government. Failure to notify the Finance Pay Policy team will result in the public body's outturn being rated Red and may result in further action as set out in paragraphs 3.113 to 3.115.

Staff pay settlements

What information is a public body required to provide once it has implemented its pay settlement?

3.111 It is important that public bodies provide confirmation that they have implemented their pay settlement and met all the conditions made as part of their approved remit in the settlement proforma. The settlement proforma must be completed and returned to the Finance Pay Policy team within one month of a public body's pay award being implemented.

3.112 Public bodies should contact the Finance Pay Policy team if they require any assistance in providing any of the required information.

What happens if a public body exceeds its pay remit?

3.113 Ministers expect all public bodies to adhere to the basis on which their remit has been approved. If a public body exceeds the key pay metrics in their approved remit; or deviates from the basis on which the remit was approved; or negotiates changes to pay and conditions without detailing or costing them in their pay remit proposals then they will be considered to have exceeded their approved pay remit.

3.114 There may be circumstances that could not have been foreseen at the time the public body submitted its remit for approval. If this means the public body will exceed or deviate from its approved remit, they must contact the Finance Pay Policy team at the earliest opportunity. The Finance Pay Policy team will advise if the changes require to be considered by Remuneration Group.

3.115 If Remuneration Group consider the issue needs to be brought to the attention of Ministers, it will then be the responsibility of the sponsor team and Accountable Officer to justify the matter to the Portfolio Minister and the Cabinet Secretary for Finance, Economy and Fair Work. Examples of this would be where the public body has significantly exceeded the approved remit or has materially moved away from the basis of that remit. In such instances, the Remuneration Group expect Ministers will take action such as the capping of future pay remits or a governance review of the body.

Staff pay worked example

Using the flexibility to use paybill savings to address equality issues

3.116 The following example illustrates how the public body can choose to use the additional flexibility in the policy to use up to 0.5 per cent of identified paybill savings to address pay inequalities.

The proposals in this worked example are:

• to apply progression under existing arrangements
• to apply the guaranteed £750 cash underpin to all pay points of £25,000 or less.
• to apply 3 per cent consolidated increase to all pay points above £25,000 and below £80,000
• to apply £2,000 to pay points £80,000 and above.
• to remove the Min+3 pay point in Grades B and C and to use the 0.5 per cent flexibilities to equalises the pay steps.

The example is based on a public body with 105.0 (FTE) across 9 grades and includes seasonal staff:

Current pay structure for staff (£)

Grade	Min	Min+1	Min+2	Min+3	Min+4	Max
A	17,385	17,850	18,350			18,800
Seasonal						18,900
B	18,900	19,900	20,900	21,900		22,725
C	22,725	23,609	24,493	25,376		26,260
D	27,270	28,180	29,090	30,000	30,910	31,820
E	33,000	34,000	35,000	36,000	37,000	38,000
F	41,000	42,500	44,000	45,500	47,000	48,500
G	55,000	57,000	59,000	61,000	63,000	65,000
H	70,000	72,500	75,000	77,500	80,000	82,500

Staff profile (FTE)

Grade	Min	Min+1	Min+2	Min+3	Min+4	Max
A	2.0	2.5	3.0			8.5
Seasonal						3.5
B	3.0	2.5	4.0	3.0		8.5
C	2.0	1.5	2.0	2.5		9.0
D	1.0	1.0	2.0	1.0	3.0	5.0
E	2.0	1.5	2.0	1.5	2.0	6.0
F	1.0	1.0	1.5	2.0	0.0	5.0
G	0.0	1.0	0.0	1.0	1.0	3.0
H	0.0	1.0	0.0	1.0	0.0	1.0

Baseline salary costs (£)

Total net baseline paybill for all staff, of which:	£3,268,896
£25,000 or below	£939,156
Between £25,000 and £80,000	£2,247,241
£80,000 or more	£82,500

Proposed pay structure (£)

Grade	Min	Min+1	Min+2	Min+3	Min+4	Max
A	17,965	18,600	19,100			19,550
Seasonal						19,650
B	19,650	20,925	22,200			23,475
C	23,475	24,666	25,857			27,048
D	28,088	29,025	29,963	30,900	31,837	32,775
E	33,660	34,680	35,700	36,720	37,740	38,760
F	41,820	43,350	44,880	46,410	47,940	49,470
G	71,400	73,950	76,500	79,050	81,600	84,100
H	18,135	18,600	19,100			19,550

Summary of costs for the proposed award as a percentage of baseline salaries:

Increase applied	Cost (£)	As a percentage of baseline salaries for the relevant cohort	As a percentage of baseline salaries
Progression	56,640		1.73%
£750 for those earning a full-time equivalent salary of £25,000 or less (1)	34,500(2)(3)	3.67%	1.06%
3% increase for those with full-time equivalent salaries above £25,000 and below £80,000	67,642(2)(3)	3.01%	2.07%
£1,600 basic pay increase for those earning £80,000 and above	2,000(2)(3)	2.42%	0.06%
Flexibilities	8,879		0.27%
Total	169,661		5.19%

(1) Includes £170 non-consolidated top-up for on living wage rate
(2) the costs are after applying the progression increase
(3) The £750 is pro-rated for part-time employees

The flexibilities are costed as follows:

Flexibility	Cost (£)	% baseline salaries
Removing Min+3 pay point in Grade B and equalising pay steps	5,500	0.17%
Removing Min+3 pay point in Grade C and equalising pay steps	3,379	0.10%
Total	8,879	0.27%