Public sector pay: Chief Executive framework review

Ten Percent Reduction

33. Another lever of pay restraint in the CE Framework is an expectation for a reduction of ten percent of the overall remuneration package when replacing a CE. This has often partially been achieved by recruiting at the bottom of the existing salary range, removing bonuses, or removing other non-pay benefits.

34. Over the last 5 years (from 2019 to date) the policy expectation to apply a 10% reduction on outgoing Chief Executive remuneration packages has delivered an estimated saving of at least £325,000 to the public purse. The cumulative saving over the last 5 years is higher than £325,000 as the saving for each post is recurring year on year, although the amount may diminish each year as the new incumbents progress up their pay ranges.

35. Over time, bonuses have been removed and are no longer a factor for the reduction. Similarly due to constrained pay progression and annual uplifts, moving new CEs to the bottom of the existing salary range may not achieve a 10 percent reduction. Many of the recent cases where 10 percent has been achieved has been through reduction of notice periods.

36. There has been a significant increase in submissions to the Remuneration Group over the last year seeking to waive the reduction and to go further by increasing the salary range. This has been due to numerous factors, of which pay restraint is one. There have also been some localised or sector specific issues, and there is often an element of market rates comparison.

37. A requirement of a ten percent reduction was useful for constraining senior pay in times where bonuses were included. Given that the pay differentials between senior staff and CEs have reduced and, in some cases, eroded entirely, this requirement is now seen as a blunt tool and a barrier to effective recruitment. This could be pivoted to state the expectation that CEs should be recruited at the bottom of a salary range except in exceptional circumstances, as is the case for other less senior staff. The Remuneration Group could be a governance route for this.

38. Although the technical guide encourages regular reviews of CE remuneration packages, it does not specify a recommended timescale. The vast majority of reviews only occur when a new CE is being recruited and there are around 20 CE salaries that have not had job evaluations for a decade or more.

39. To ensure that salaries continue to be appropriate, a specified time limit between regular reviews should be set to bring some stability to the pay range and ensure a range is connected to the role and not a person being recruited. It would be appropriate to obtain a job evaluation and conduct a review for CE roles every five to seven years. The recommended timeframe would not preclude organisations from reviewing CE salaries if there is a need to do so such as recruitment of a new CE or significant changes to the role or responsibilities of the organisation.

Recommendation 3a: CE roles should undergo a job evaluation and full review at least once every five to seven years or sooner if there has been a significant change to the role/responsibilities of the body.

Recommendation 3b: That the requirement for a ten percent reduction is removed and instead there is an expectation that new CEs are recruited to the bottom of salary ranges, except in exceptional circumstances requiring additional approval.