Public sector pay policy 2022 to 2023: technical guide

3. Staff Pay Remits

Please note this section should be read in conjunction with sections 1, 2 and 3A

Key pay policy priorities and key metrics for staff pay in 2022-23

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

3.1 The key features of the 2022-23 pay policy are set out in paragraphs 1.4 and 1.5. Public bodies are expected to implement the basic pay increases on the recognised settlement date (which is 1 April for the majority of public bodies) and the costs of applying these increases should be included in the pay remit which will be assessed on the following:

• Affordability and sustainability - the financial impact of the pay remit proposals – which includes:
  • the cost of the basic pay increases,
  • 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.
• The use of paybill savings particularly if there are proposals to address inequalities or if the savings are non-recurring.

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 reward staff fairly 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 public body covered by the policy must ensure that their pay proposals are affordable within their financial settlement for 2022-23.

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^[8] 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 agreed⁸ 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 agreed⁸ 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 If a public body 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?

3.7 Employers must apply the guaranteed £775 cash underpin for all staff whose current fulltime equivalent salary is below the Lower pay threshold (£25,000). For staff earning between the Lower and Intermediate pay thresholds (i.e. between £25,000 and £40,000) employers can apply a basic pay increase of £700. For all staff earning above the Intermediate pay threshold (i.e. above £40,000), employers can apply a basic pay increase of £500.

3.8 If a public body proposes to award more than these to address evidenced inequalities, the additional cost of applying above the levels guaranteed in the pay policy must be met from the 0.5 per cent limit for flexibilities (paragraphs 3.75 to 3.81). The only exception being where higher increases are required to maintain the integrity of existing pay and grading structures for grades which are close to or cross the Lower or Intermediate pay thresholds (see paragraphs 3.39 to 3.44 and 3.52 to 3.58).

3.9 It is the responsibility of each organisation to ensure their full paybill costs can be met from within their agreed⁸ budget provision. However, where a public body has evidenced inequalities but has difficulty in meeting the full cost from paybill savings they are invited to contact the Public Sector Pay Policy team and their Sponsor team (where applicable) to discuss options.

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 The 2022-23 pay policy allows public bodies to use paybill savings of up to 0.5 per cent of baseline salaries to address inequalities including addressing the current increases to cost of living. This is subject to the public body being able to demonstrate that they can deliver the necessary savings to sustainably offset the higher cost. For further detail refer to paragraphs 3.75 to 3.81.

3.12 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. Non-recurring savings are savings which are realised within the pay year whereas recurring savings are those which result in a permanent reduction in the paybill. For example non-recurring savings include those arising from staff turnover (recyclable savings) or from gapping vacancies etc, and recurring savings would be reductions in staffing and the removal of allowances or reductions in overtime.

3.13 Public bodies may use paybill savings to make affordable and sustainable changes to their existing pay and grading structures, or changes to existing terms and conditions to address evidenced equality issues, or to award higher increases as part of identified pay coherence issues. In such instances the public body must be able to demonstrate that these are funded from recurring savings and provide confirmation that future paybills will be 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 and that they have agreement to carry forward any unused savings, where appropriate. 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.

3.15 However, where a public body has evidence inequalities but has difficulty in meeting the full cost from paybill savings, they are invited to contact the Public Sector Pay Policy team and their Sponsor team (where applicable) to discuss options.

What costs must be included in the pay remit?

3.16 The pay remit costings must include the cost of all^[9] 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.

3.17 The pay remit costings should also include the costs of any changes to existing allowance rates^[10], the buying-out of existing allowances or the introduction of new allowances ¹⁰ 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.

3.18 Proposals which carry a notional cost (such as, for example, reduction in the working week or changes in the qualifying period for annual leave etc.) 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. (paragraph 3.72).

3.19 The Scottish Government encourages employers to offer assistance with green 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 3.72) although the public body is required to provide confirmation the costs can be accommodated within the agreed budget for the period.

3.20 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.

3.21 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.

3.22 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 wage floor of £10.50 per hour
• the guaranteed cash underpin of £775 for staff below the Lower pay threshold (£25,000)
• the basic pay increase of £700 for staff earning between the Lower and Intermediate pay thresholds (£25,000 to £40,000)
• the basic pay increase of £500 for staff earning above the Intermediate pay threshold (£40,000)
• proposals to access the 0.5 per cent additional flexibilities for addressing inequalities
• associated increases in the costs of overtime and/or 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?

3.23 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.

3.24 The costs of paying the employer's Apprenticeship Levy should also 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?

3.25 Employers covered by the policy are required to:

• pay a minimum wage floor of £10.50 per hour
• ensure all staff below the Lower pay threshold (£25,000) receive the guaranteed cash underpin of £775

Further details are set out in paragraphs 3.28 to 3.33 below.

What is the pay policy position on the real Living Wage?

3.26 Scottish Ministers support the payment of the real Living Wage across all sectors. However this year for the first time, the pay policy sets a guaranteed wage floor based on an hourly rate of £10.50 which is above the real Living Wage (which is set at £9.90 per hour for 2022-23). The position for Interns and Modern Apprentices is set out in paragraphs 3.30 and 3.31.

3.27 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.

What is the guaranteed wage floor and how should it be applied?

3.28 The pay policy requirement is that the employer of every worker whose pay is controlled directly by the Scottish Government will pay a guaranteed wage floor which is set at £10.50 per hour.

3.29 The wage floor should be applied as an hourly rate.

How does the pay policy apply to Modern Apprentices?

3.30 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 create 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 role.
• Specific training role - they are expected to pay at least the real Living Wage rate, 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 real 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.

How does the pay policy apply to interns?

3.31 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 3.30 for Modern Apprentices. Where it is appropriate and where they can afford to do so, employers should pay the real Living Wage rate, particularly where the intern is undertaking a job equivalent to other staff within the organisation.

Who is eligible for the £775 guaranteed cash underpin?

3.32 The policy requires that employers provide a guaranteed £775 cash underpin to all staff whose current^[11] fulltime equivalent base salary is below the Lower pay threshold (£25,000). The policy expectation is for the guaranteed £775 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, 3.61 to 3.64.

3.33 The policy position is that the guaranteed £775 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 or an established policy on linking pay to performance (see paragraph 3.10).
• An existing pay point is uplifted to deliver the guaranteed wage floor and the increase on the pay point is less than £775. In such cases public bodies may seek approval for the difference to be awarded as a non-consolidated payment.

What is the increase for staff earning between the Lower and Intermediate pay thresholds?

3.34 The pay policy intention is that every worker whose current^[12] fulltime equivalent salary is between the Lower and Intermediate pay thresholds (£25,000 and £40,000) should receive a basic pay increase of up to £700. The policy expectation is for the basic pay increase 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, 3.61 to 3.64.

3.35 The pay policy position is that this payment should be in addition to any progression increase (where eligible).

3.36 The pay policy expects public bodies to apply the basic pay increase as a consolidated award. The only exceptions to this being, where a public body has an established policy on pay protection or an established policy on linking pay to performance (see paragraph 3.10).

Can a public body propose to pay more than £700 to staff earning between the Lower and Intermediate pay thresholds?

3.37 A public body may propose to apply more than £700 to address evidenced equality issues. In such cases, the additional amount above the £700 would normally require to be costed from the flexibility allowed in the 2022-23 pay policy (see paragraphs 3.75 to 3.81). Employers may also propose a "smoothing" increase of more than £700 to address any "leapfrogging" or structural issues as a result of the guaranteed cash underpin for lower earners (see paragraphs 3.39 to 3.44).

3.38 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. Where savings are being used to fund consolidated increases the public body must be able to demonstrate that they are recurring savings to ensure future affordability.

What can a public body do if they have staff whose base pay is currently just above the Lower pay threshold?

3.39 A public body may propose to pay a higher "smoothing" increase to provide an overall increase of up to £775 to staff who are currently on a base salary that is just over the Lower pay threshold (£25,000) to address any possible "leapfrogging", and to maintain the integrity of their current pay system. The level of increases within a pay range may be tapered to mitigate the impact on the pay gap between pay ranges. It will depend upon the proposals as to how the costs will be treated within the pay remit, and the following paragraphs set out the expected approach for a pay range that crosses, or is just above the Lower pay threshold (£25,000).

The application of "smoothing" increases within a pay range which crosses the Lower pay threshold

3.40 It will depend upon the amount above the Lower pay threshold (£25,000) as to how the costs will be treated within the pay remit.

3.41 If less than half (50 per cent) of the difference, between the pay point and the pay range minima, is above the Lower pay threshold (£25,000) then the costs of providing an increase up to the £775 cash underpin will be included within the low pay measures. Otherwise, the top-up will require to be costed from the paybill flexibilities to address inequalities. The same principle would apply to a pay range minima which is just above the Lower pay threshold (£25,000).

3.42 Where a public body proposes to apply more than the guaranteed £775 for lower paid staff then the additional amount above the £775 would require to be costed from the flexibilities allowed in the 2022-23 pay policy to address evidenced equality issues (see paragraphs 3.75 to 3.81). If the additional amount is consolidated, the public body must be able to demonstrate that the additional amount can be funded from recurring savings to ensure future affordability.

3.43 This is illustrated in the following two examples:

Example 1: based on maintaining a fixed monetary amount between pay points:

• In this first example the proposal is to apply £775 on all pay points to maintain a £750 differential between pay points.
• The cost of providing the £75 top-up for all staff on the Min+2 pay point would be costed under the low pay measures. This is because only 17 per cent of the difference between Min+2 and the Minimum is above the £25,000 Lower pay threshold (£250/£1,500).
• Similarly, the cost for providing the additional £75 top-up for staff on the Min+3 point would also be costed under the low pay measures as again it meets the 50 per cent criteria.
• The cost of providing the £75 top-up for staff on the pay range Maximum would require to be costed from the flexibilities to address inequalities. This is because more than half (58 per cent) of the difference between Minimum and the Maximum is above the £25,000 Lower pay threshold.

Current Pay point	Minimum £23,750	Min+1 £24,500	Min+2 £25,250	Min+3 £26,000	Maximum £26,750
Difference between pay point and the minimum	£0	£750	£1,500	£2,250	£3,000
Amount above the £25,000 Lower pay threshold	£0	£0	£250	£1,000	£1,750
Percentage of the pay range above the £25,000 Lower pay threshold	0%	0%	17%	44%	58%
Proposed Pay point	£24,525	£25,275	£26,025	£26,775	£27,525

Example 2: based on maintaining the same percentage between pay points

• In this second example the proposal is to apply £775 on all pay points to maintain the same percentage difference between pay points.
• The cost of providing the £75 top-up for staff on the Min+2 pay point would be costed under the low pay measures. This is because only 14 per cent of the difference between Min+2 and the Minimum is above the £25,000 Lower pay threshold.
• The cost for providing the additional £75 top-up for staff on the Min+3 point would also be costed under the low pay measures as again it meets the 50 per cent criteria.
• However, the cost of providing the £75 top-up for staff on the pay range Maximum would require to be costed from the flexibilities to address inequalities. This is because more than half (58 per cent) of the difference between Minimum and the Maximum is above the £25,000 Lower pay threshold.
• The 3 per cent difference between the current pay points reduces to 2.91 per cent per cent following application of the £775 cash underpin. Any further adjustments to the pay points which result in applying more than £775 would require to be costed under the paybill flexibilities.

Current Pay point	Min £23,750	Min+1 £24,463	Min+2 £25,196	Min+3 £25,952	Max £26,731
Percentage difference between pay points		3.00%	3.00%	3.00%	3.00%
Difference between pay point and the minimum	-	£713	£1,446	£2,202	£2,981
Amount above the £25,000 Lower pay threshold	-	-	£196	£952	£1,731
Percentage above the £25,000 Lower pay threshold	-	-	14%	43%	58%
Proposed Pay point	£24,525	£25,238	£25,971	£26,727	£27,506
Percentage difference between pay points		2.91%	2.91%	2.91%	2.91%

The application of "smoothing" increases for pay ranges which are above the Lower pay threshold

3.44 A public body may propose to pay "smoothing" increases of more than £700 on pay points in pay ranges which sit above the Lower pay threshold (£25,000) to address any possible "leapfrogging" and/or to maintain the integrity of their current pay systems. The level of increases within a pay range may be tapered to mitigate the impact on the pay gap between pay ranges.

3.45 It will depend upon the amount above the Lower pay threshold (£25,000) as to how the costs will be treated within the pay remit. The same principle is applied as for pay ranges which cross the Lower pay threshold (£25,000).

3.46 If less than half (50 per cent) of the difference, between the pay point and the pay range maxima of the grade below, is above the Lower pay threshold (£25,000) then the costs of providing an increase up to the £775 cash underpin will be included within the low pay measures. Otherwise, the top-up will require to be costed from the paybill flexibilities to address inequalities. This is illustrated in the following example:

Current Pay point	Min £25,250	Min+1 £25,750	Min+2 £26,250	Min+3 £26,750	Max £27,250
Difference between pay point and the maximum (£24,250) of the grade below	£1,000	£1,500	£2,000	£2,500	£3,000
Amount above the £25,000 Lower pay threshold	£250	£750	£1,250	£1,750	£2,250
Percentage of the pay range above the £25,000 Lower pay threshold	25%	50%	63%	70%	75%
Proposed Pay point	£26,025	£26,525	£27,025	£27,525	£28,025

• In this example the proposal is to apply £775 on all pay points to maintain the same differential between pay.
• The cost of providing the £75 top-up for all staff on the Min and Min+1 pay points would be costed under the low pay measures. This is because 50 per cent or less of the difference between the pay point and the maximum of the range below is above the Lower pay threshold (£25,000).
• The cost of providing the £75 top-up for staff on Min+2 and above would require to be costed from the flexibilities to address inequalities. This is because more than half (at least 63 per cent) of the difference between the pay point and the maximum of the range below is above the Lower pay threshold (£25,000).

3.47 Where a public body proposes to apply more than the guaranteed £775 for lower paid staff then the additional amount above the £775 would require to be costed from the flexibilities allowed in the 2022-23 pay policy to address evidenced equality issues (see paragraphs 3.7 to 3.75). If the additional amount is consolidated the public body must be able to demonstrate that the additional amount can be funded from recurring savings to ensure future affordability.

What is the increase for staff earning above the Intermediate pay threshold?

3.48 The pay policy intention is that every worker whose current fulltime equivalent salary is above the Intermediate pay threshold (£40,000) should receive a basic pay increase of £500. The pay policy position is that this payment should be in addition to any progression increase (where eligible).

3.49 The pay policy expects public bodies to apply the basic pay increase as a consolidated award. The only exceptions to this being, where a public body has an established policy on pay protection or an established policy on linking pay to performance (see paragraph 3.10).

Can a public body propose to pay more than £500 to staff earning above the Intermediate pay threshold?

3.50 A public body may propose to apply more than £500 to address evidenced equality issues. In such cases, the additional amount above £500 would normally require to be costed from the flexibility allowed in the 2022-23 pay policy (see paragraphs 3.75 to 3.81). Employers may also propose a "smoothing" increase of more than £500 to address any "leapfrogging" or structural issues as a result of the guaranteed cash underpin for lower earners (see paragraphs 3.52 to 3.58).

3.51 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. Where savings are being used to fund consolidated increases the public body must be able to demonstrate that they are recurring savings to ensure future affordability.

What can a public body do if they have staff whose base pay is currently just above the Intermediate pay threshold?

3.52 A public body may propose to pay a higher "smoothing" increase to provide an overall increase of up to £700 to staff who are currently on a base salary that is just over the Intermediate pay threshold (£40,000) to address any possible "leapfrogging" and to maintain the integrity of their current pay systems. The level of increases within a pay range may be tapered to mitigate the impact on the pay gap between pay ranges. It will depend upon the proposals as to how the costs will be treated within the pay remit and the following paragraphs set out the expected approach for a pay range that crosses or is just above the Intermediate pay threshold (£40,000).

The application of "smoothing" increases within a pay range which crosses the Intermediate pay threshold

3.53 It will depend upon the amount above the threshold as to how the costs will be treated within the pay remit.

3.54 If less than half (50 per cent) of the difference, between the pay point and the pay range minima, is above the Intermediate pay threshold (£40,000) then the costs of providing an increase of up to £700 will be included within the low pay measures. Otherwise the top-up will require to be costed from the paybill flexibilities to address inequalities. The same principle would apply to a pay range minima which is just above the Intermediate pay threshold (£40,000).

3.55 Where a public body proposes to apply more than £700 for staff earning between the Lower and Intermediate pay thresholds (£25,000 to £40,000) then the additional amount above the £700 would require to be costed from the flexibilities allowed in the 2022-23 pay policy to address evidenced equality issues (see paragraphs 3.75 to 3.81).

3.56 This is illustrated in the following two examples:

Example 1: based on maintaining a fixed monetary amount between pay points:

• In this first example the proposal is to apply £700 on all pay points to maintain a £1,000 differential between all pay points.
• The cost of providing the £200 top-up for all staff on the Min+2 and Min+3 pay points would be costed under the basic pay uplift for staff earning between the Lower and Intermediate Thresholds (£25,000-£40,000). This is because 50 per cent or less of the difference between the pay point and the Minimum is above the £40,000 Intermediate pay threshold.
• The cost of providing the £200 top-up for staff on pay point Min+4 and the pay range Maximum would require to be costed from the flexibilities to address inequalities. This is because more than half of the difference between Minimum and the pay points are above the £40,000 Intermediate pay threshold.

Current Pay point	Min £38,500	Min+1 £39,500	Min+2 £40,500	Min+3 £41,500	Min+4 £42,500	Max £43,500
Difference between pay point and the minimum	£0	£1,000	£2,000	£3,000	£4,000	£5,000
Amount above the £40,000 Intermediate pay threshold	£0	£0	£500	£1,500	£2,500	£3,500
Percentage above the £40,000 Intermediate pay threshold	0%	0%	25%	50%	63%	70%
Proposed Pay point	£39,200	£40,200	£41,200	£42,200	£43,200	£44,200

Example 2: based on maintaining the same percentage between pay points:

• In this second example the proposal is to apply £700 on all pay points to maintain the same percentage difference between pay points.
• The cost of providing the £200 top-up for all staff on the Min+2 and Min+3 pay points would be costed under the cost of the basic pay uplift for staff earning between the Lower and Intermediate Thresholds (£25,000-£40,000). This is because 50 per cent or less of the difference between the pay point and the Minimum is above the £40,000 Intermediate pay threshold.
• However, the cost of providing the £200 top-up for staff on pay point Min+4 and the pay range Maximum would require to be costed from the flexibilities to address inequalities. This is because more than half of the difference between Minimum and the pay points are above the £40,000 Intermediate pay threshold.
• The 2.47 per cent difference between the current pay points would reduce to 2.43 percent after applying the above "smoothing". Any further adjustments to the pay points which result in applying more than £700 would require to be costed under the paybill flexibilities.

Current Pay point	Min £38,500	Min+1 £39,451	Min+2 £40,425	Min +3 £41,424	Min+4 £42,447	Max £43,495
Difference between pay points		2.47%	2.47%	2.47%	2.47%	2.47%
Difference between pay point and the minimum	£0	£951	£1,925	£2,924	£3,947	£4,995
Amount above the £40,000 Intermediate pay threshold	£0	£0	£425	£1,424	£2,447	£3,495
Percentage above the £40,000 Intermediate pay threshold	0%	0%	22%	49%	62%	70%
Proposed Pay point	£39,200	£40,151	£41,125	£42,124	£43,147	£44,195
Difference between pay points		2.43%	2.43%	2.43%	2.43%	2.43%

The application of "smoothing" increases for pay ranges which are above the Intermediate pay threshold

3.57 A public body may propose to pay "smoothing" increases of more than £700 on pay points in pay ranges which sit above the Intermediate pay threshold (£40,000) to address any possible "leapfrogging" and/or to maintain the integrity of their current pay systems. The level of increases within a pay range may be tapered to mitigate the impact on the pay gap between pay ranges.

3.58 It will depend upon the amount above the Intermediate pay threshold (£40,000) as to how the costs will be treated within the pay remit. The same principle is applied as for pay ranges which cross the Intermediate pay threshold (£40,000).

3.59 If less than half (50 per cent) of the difference, between the pay point and the pay range maxima of the grade below, is above the Intermediate pay threshold (£40,000) then the costs of providing an increase up to £200 will be included within the basic pay increases. Otherwise, the top-up will require to be costed from the paybill flexibilities to address inequalities. This is illustrated in the following example:

Current Pay point	Min £41,000	Min+1 £41,500	Min+2 £42,000	Min+3 £42,500	Max £43,000
Difference between pay point and the maximum (£38,500) of the grade below	£2,500	£3,000	£3,500	£4,000	£4,500
Amount above the £40,000 Intermediate pay threshold	£1,000	£1,500	£2,000	£2,500	£3,000
Percentage of the pay range above the £40,000 Intermediate pay threshold	40%	50%	57%	63%	67%
Proposed Pay point	£41,700	£42,200	£42,700	£43,200	£43,700

• In this example the proposal is to apply £500 on all pay points to maintain the same differential between pay.
• The cost of providing the £200 top-up for all staff on the Min and Min+1 pay points would be costed under the basic pay increases. This is because 50 per cent or less of the difference between the pay point and the Maximum of the range below is above the Intermediate pay threshold (£40,000).
• The cost of providing the £200 top-up for staff on Min+2 and above would require to be costed from the flexibilities to address inequalities. This is because more than half (at least 57 per cent) of the difference between the pay point and the Maximum of the range below is above the Intermediate pay threshold (£40,000).

3.60 Where a public body proposes to apply more than the guaranteed £700 for staff earning between the Lower pay threshold (£25,000) and the Intermediate pay threshold (£40,000) then the additional amount above the £700 would require to be costed from the flexibilities allowed in the 2022-23 pay policy to address evidenced equality issues (see paragraphs 3.70 to 3.75). If the additional amount is consolidated, the public body must be able to demonstrate that it's funded from recurring savings to ensure future affordability.

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

3.61 The policy intention is for all increases to be based on an individual's fulltime equivalent salary so that part-time employees will receive all increases on a pro-rata basis. The reason for this, is that it is the most equitable approach and maintains the integrity of existing pay and grading structures. This approach provides all staff in the same grade and/or job weight the same proportionate increase, ensuring equal pay for like work or work of equal value.

3.62 However, the pay policy provides scope 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 pay policy limits would require to be met from the paybill flexibilities (paragraphs 3.75 to 3.81) allowed in the pay policy to address inequalities.

3.63 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, compared within other employees with the same length of time in post but have worked fulltime. There is also a risk that to pay all staff the same increase regardless of hours worked could undermine working relations between employees.

3.64 This may be better illustrated by the following two examples where the fulltime and part-time equivalent salaries are above and below the Lower and Intermediate thresholds based on a fulltime working week of 37 hours although the principles would be the same for a 35 hour working week.

Example 1: based on salaries above and below the Lower pay threshold:

Employee A: works fulltime with a salary of £24,000

Employee B: works part-time with a take-home salary of £24,000 (based on a fulltime equivalent salary of £ 35,520)

Employee C: works fulltime with a salary of £35,520

Employee	Hours	Current salary	Current Hourly rate*	Increase	Revised Salary	Revised Annual Salary FTE	Revised Hourly rate*
A	37	£24,000	£12.43	£775	£24,800	£24,800	£12.84
B	25	£24,000	£18.39	£775	£24,800	£36,704	£19.00
C	37	£35,520	£18.39	2%	£36,230	£36,230	£18.76

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

In this example, both employee A and employee B have a salary of £24,000 regardless of hours worked, however the fulltime employee's (employee A) current hourly rate is £12.43 compared with the part-time employee (employee B) of £18.39. Therefore, if the part-time employee (employee B) were to receive a £775 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 fulltime equivalent co-worker (employee C) on the same grade and equivalent fulltime pay point (£19.00 compared with £18.76).

Example 2: based on salaries above and below the Intermediate pay threshold:

Employee A: works fulltime with a salary of £38,000

Employee B: works part-time with a take-home salary of £38,000 (based on a fulltime equivalent salary of £ 46,867)

Employee C: works fulltime with a salary of £46,867

Employee	Hours	Current salary	Current Hourly rate*	Increase	Revised Salary	Revised Annual Salary FTE	Revised Hourly rate*
A	37	£38,000	£19.67	2.0%	£38,760	£38,760	£20.07
B	25	£38,000	£24.27	2.0%	£38,760	£47,804	£24.75
C	37	£46,867	£24.27	1%	£47,335	£47,335	£24.51

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

In this example, both employee A and B have a salary of £38,000 regardless of hours worked, however the fulltime employee's current hourly rate is £19.67 compared with the part-time employee of £24.27. Therefore if the part-time employee were to receive a 2 per cent increase, on the basis that their take-home pay was less than £40,000, this would mean that their hourly rate, following the pay increase, would then be higher than their fulltime equivalent co-workers on the same grade and equivalent fulltime pay point (i.e. £24.75 compared with £24.51).

What is the position on progression?

3.65 Nothing in the policy is intended to interfere with existing pay progression arrangements or to constrain discussions between employers and staff on this issue. However, any progression increase should not result in an individual exceeding their recognised pay maxima. If for any reason it does exceed the pay maxima, then the balance up to the guaranteed amount must be paid as non-consolidated.

3.66 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.

3.67 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. 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 Public Sector Pay Policy team and their sponsor division and Finance Business Partner at the earliest opportunity.

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

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

3.70 The cost of paying progression under existing arrangements continues to be costed outwith the pay policy limits (see paragraph 3.73) 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.

3.71 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 3.75 to 3.81.

What is included within the pay policy limits?

3.72 All increases to pay must be included within the specified pay policy limits set out for 2022-23 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 3.75 to 3.81. Increases within the limits will include:

• The basic award including the specified low pay measures (see paragraph 3.25)
• The cost of any payment to staff on pay protection

What are outwith the pay policy limits?

3.73 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 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.

3.74 For costs that are outwith the pay remit refer to paragraphs 3.23 and 3.24 .

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

3.75 Public bodies will be able to use paybill savings, of up to 0.5 per cent of baseline salaries (see paragraph 1.4), to address inequalities, subject to the public body being able to demonstrate that they can deliver the necessary savings to sustainably off-set the cost. The inequalities would be any or all of the following:

• Inequalities arising from recruitment and retention issues.
• Pay coherence and closer alignment to equivalent Scottish Government pay ranges and/or terms and conditions.
• Provide additional non-consolidated increases to help reduce the impact of inflation on take-home pay.

3.76 Where proposals to use flexibilities exceed 0.5 per cent, public bodies may be able to submit proposals which carry forward up to 0.5 per cent unused flexibilities from 2021-22 to 2022-23. Approval of such proposals will be subject to the public body being able to demonstrate that they can deliver the necessary savings to sustainably off-set the higher cost. Where a public body is seeking to carry forward unused flexibilities, they should contact the Public Sector Pay Policy team at an early stage.

3.77 Where a public body proposes to use the flexibilities to apply consolidated increases then they must demonstrate that such proposals can be funded by recurring savings.

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

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

• Reducing any gender pay gap and/or the overall pay gap between the highest and lowest earners.
• Applying "smoothing" increases to remove the risk of "leapfrogging" and reduce the impact of the stepped increases on existing pay and grading structures.
• Making minor changes to existing pay and grading structures, including:
  • reducing progression journey times (removing minima and/or recalibrating pay steps)
  • recalibrating existing pay steps
  • reducing and/or removing overlaps between grades
  • See paragraphs 3.88 and 3.89 for further detail.
• Applying higher increases to work towards standardising rates of pay (pay coherence).
• Standardising to a 35 hour working week. (see paragraphs 3.82 to 3.87 for further detail)
• 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.
• Providing non-consolidated increases to help reduce the impact of inflation on take-home pay.

3.79 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, in particular the Scottish Government.
• Any proposed increases to existing band maxima of more than the limits set out in the 2022-23 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 maximum qualifying time for annual leave entitlement of no more than 5 years.

3.80 Where a public body provides clear evidence of equality issues, they must demonstrate each of the following points.

• The cost does not exceed 0.5 per cent of baseline salaries (see paragraph 1.4)
• 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 Public Sector 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 (i.e. they do not create pressure on future baseline paybills).
• Consolidated increases are funded by recurring savings.

3.81 See the worked example on using paybill savings to address equality issues (paragraph 3.155).

What is required if a public body wants to submit proposals for reducing the working week?

3.82 The 2022-23 Public Sector Pay Policy continues to provide the discretion for employers to work towards standardising to a 35 hour working week as well as introducing the opportunity to explore the risks and benefits of a four day working week. While the following framework is primarily designed for employers moving towards 35 hours, the principles will also be relevant for those considering a reduction in the working week as wider workforce reform. The reduction should be delivered through normal negotiations as part of a progressive and agreed package of measures, including terms and conditions that support new ways of working.

3.83 Where an employer is looking to work towards a 35 hour working week they will be required to seek approval from Scottish Government in line with the standard pay remit process. The business case should include a cost/benefit analysis of any reduction in hours to demonstrate that it can be delivered within existing resources and there will be no detrimental impact on productivity or maintaining service delivery. The purpose of providing a framework is to ensure public bodies provide sufficient information to enable their proposals to be assessed on a consistent and equitable basis.

3.84 It is the Public Sector Pay Policy team's role to ensure that all pay proposals, including standardising to 35 hours, are in line with pay policy. It is the Sponsor team and Finance Business Partner's role to consider the affordability and impact of the proposals. The Public Sector Pay Policy team will provide advice to support the public body and their Sponsor team in drafting their business case to ensure that all potential costs/benefits are considered including potential hidden financial implications that the public body may not have considered.

3.85 The following framework has been prepared to provide support in drafting a business case.

Framework for the business case to reduce working hours

3.86 When submitting a business case employers must demonstrate they have considered the following while preparing their proposals (this list is not exhaustive and employers are free to include additional considerations when submitting a business case):

• Benefits and risks of the change in hours
  • Including environmental impact.
• Productivity/service delivery impact
  • How will the public body measure and monitor the reduction in working hours. This could include agreed productivity or key performance indicators, service delivery as well as staff engagement scores, sickness absence, accruals to leave and/or flexi time, use of overtime, staff turnover etc. (it is recognised that productivity and service delivery impact may be measured differently in different sectors)
  • How do employers plan to handle the impact of a shorter working week. While this may be particularly relevant for public facing roles there will still be an impact for other roles (for example what will a shorter working week look like and how will it be managed?).
• Trade union and/or staff engagement
  • What has been agreed with the unions/staff in relation to a reduced working week (examples might include determining the measures for monitoring the impact of the changes, more flexibility in availability of staff, reductions in overtime rates or reductions in overtime incurred by extending the working week).
• Financial Impact
  • On the assumption of no additional funding.
  • Impact on existing staffing numbers. The policy expectation is that all staff will have the reduction in hours applied on the same pro-rated basis.
  • Impact of the change in hours on overtime and allowances. Any proposed trade-offs e.g. changes to allowance, overtime rates etc. Employers will need to accommodate any increase in hourly rates within their agreed overtime budgets allocations.
  • Implications for part-time employees (e.g. reduced hours or increased hourly rate) and the potential cost.
  • Any incidental costs associated with changing working hours (e.g. changes to other HR policies, IT costs – such as consultant/developer costs associated payroll and HR systems or the need for new systems)
  • Any forecast recurring costs as a consequence of the changes.
• Future of work and staff wellbeing.
  • Hybrid working
  • Flexible working - what will a 35 hour week look like? Will it still be the same number of days but with less working hours per day or fewer working days, or is this being coupled with more flexibility in how/when/where work is undertaken?
  • Right to Disconnect
• Systems impact
  • Can the changes be accommodated within existing IT systems?
• Contractual issues
• Pension implications
• Annual Leave and Public Holidays
• Details of any pilot scheme (if proposed).
• Plans and timescales for implementation
  • If reducing hours, but not as low as 35, the business case would be expected to set out whether any further reductions are planned in future years.
• Equality impact assessment of the proposed changes.
  • To consider all protected characteristics including gender, disability, age, ethnicity etc.

3.87 Public bodies are encouraged to contact the Public Sector Pay Policy team and Sponsor teams (where applicable) at the earliest opportunity to discuss their proposals. The Public Sector Pay Policy team can provide a template to assist public bodies in setting out their business case.

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

3.88 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 points:

• The wider read across of their proposals for other public bodies.
• The pay 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. 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 – public bodies undergoing pay system review, redesign and reconstruction are permitted to address structural costs in their remits. They are expected to confirm the changes are affordable and sustainable in the years following the implementation of the restructuring. To demonstrate this public bodies are expected to provide projected annual progression costs for the three years following implementation of the restructuring.

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

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

3.90 The 2022-23 pay policy continues to encourage smaller^[13] bodies to consider making a business case to align with another appropriate existing pay system (such as the Scottish Government or another Agency or Non‑Departmental Public Body) which will be referred to as the host public body.

3.91 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.

3.92 Public bodies wishing to put forward a case to align to another public body's pay system should speak to the Public Sector Pay Policy team in the first instance, and in advance of their 2022-23 settlement date.

3.93 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 Public Sector Pay Policy team.

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

3.94 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.

3.95 Public bodies should note the basis of approval of pay remits in paragraphs 3.146 to 3.148 and ensure they do not create any new contractual obligations.

Staff pay remit approvals process

What is the pay remit process in 2022-23?

3.96 All public bodies are required to complete an assessment pro forma in which they provide:

• 2021-22 outturn information.
• The 2022-23 baseline position.
• Indicative costs for applying the basic pay increases, progression and where relevant, proposals under the flexibilities.
• Forecast paybill savings and the likelihood of being able to deliver these savings, particularly if the proposals include using the flexibilities to address inequalities.

3.97 Public bodies should also 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.

3.98 Pay proposals are assessed by the Public Sector Pay Policy team, and where relevant, in conjunction with the Sponsor team and Finance Business Partner using a risk-based approach. Separate risk assessments are carried out on 2021-22 outturn and the 2022-23 pay remit proposals, with each public body then assigned to one of three remit processes, which in turn determines whether proposals are signed off by Senior Officials, or Remuneration Group.

3.99 The Sponsor team , Finance Business Partners and the Public Sector Pay Policy team will comment on the outline proposals. It will be the responsibility of the sponsor team to highlight any issues or affordability pressures and along with the Finance Business Partner approve the optimum funding envelope. The Public Sector 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.

3.100 The Sponsor Team may provide justification for a proposal to be assigned a remit process with more oversight than determined by the Public Sector Pay Policy team using the risk-based approach, or vice versa. In that circumstance, the default position is to use the remit process with greater oversight.

3.101 The broad pay remit assessment process is summarised below:

• The public body submits proforma to the Sponsor team, copied to the Public Sector Pay Policy team.
• Public Sector Pay Policy team risk assesses the 2021-22 outturn, and assigns one of a Green (low risk), Amber (medium risk) or Red (high risk) rating. Details on the underpinning criteria are summarised here.
• Public Sector Pay Policy team risk assesses the 2022-23 pay proposals, and assigns one of a Green (low risk), Amber (medium risk) or Red (high risk) rating. Details on the underpinning criteria are summarised here.
• Based on the risk assessments carried out, the 2022-23 remit is assigned to one of two remit processes: fast-track, or full-remit process.
• If proposals are approved, the public body engages in formal pay negotiations and implements the agreed pay award. The full-remit process requires additional Scottish Government sign-off (see below).
• Within one month of a pay award's implementation, the public body submits settlement information to the Public Sector Pay Policy team.

3.102 The Scottish Government's pay proposals require to be approved by Scottish Ministers. Analogue bodies' 2022-23 proposals will be rated the same as Scottish Government's pay proposals.

3.103 The following table summarises how the outturn and pay proposal ratings inform the assigned pay remit process and who provides sign-off.

Remit process	2021-22 outturn rating	2022-23 remit proposals rating	Decision maker	If approved, next steps
Fast-track process	Green or Amber	Green	Senior Officials within the sponsor area[14]	Public body can engage in formal pay negotiations. Thereafter public body provides provide settlement information once the pay award was implemented.
Full-remit process	Green or Amber	Amber	Senior Officials[15] or Remuneration Group	The public body has their pay proposals considered by either Senior Officials or the Scottish Government's Remuneration Group prior to engaging in formal negotiations.
	Red	Green or Amber

3.104 Any proposals which are assessed as Red are unable to be put forward for approval.

3.105 The process 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 pay 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 is the approvals process for the reduced working hours business case?

3.106 Public bodies should submit their business case to the Public Sector Pay Policy and Sponsor teams (where applicable) at the same time.

3.107 The business case will be reviewed by the Public Sector Pay Policy team to ensure the proposals provide sufficient detail and are in line with pay policy expectations.

3.108 The Sponsor team along with the Finance Business Partner will consider the business case in the context of business delivery and value for money. The Finance Business Partner may also consider the wider read-across on a case-by-case basis.

3.109 Where it is agreed that the proposals are within the pay policy parameters and both the Sponsor team and the Finance Business Partner are content for their interests any proposals can be approved in line with the standard pay remit process. Where proposals are considered to be novel or not within pay policy, Senior Officials will refer them to the Scottish Government's Remuneration Group for approval. The Public Sector Pay Policy team will provide regular updates to Remuneration Group on all aspects of implementing pay policy, including changes to 35 hours.

3.110 Reducing the working week should be achievable through normal negotiations, as part of a progressive and agreed package of measures including terms and conditions that support new ways of working.

How is the outturn rating decided in the assessment process?

3.111 The previous year's outturn information is required to 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.

3.112 The Public Sector Pay Policy team will rate the outturn for the previous year as follows:

Outturn Rating	Criteria
Green	The outturn will be rated as Green if all of the following apply: the settlement information for 2021-22 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 2021-22 has not been provided, or was not provided within four weeks of the award's implementation. 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. However, 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 differed 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.

3.113 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, regardless of the 2022-23 proposal ratings.

3.114 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 3.149 to 3.154.

How is the pay remit rating decided in the assessment process?

3.115 The current year's remit is assessed by the Public Sector Pay Policy team, in conjunction with sponsor team colleagues where needed. The Public Sector Pay Policy team however assign the final pay remit rating. The table below summarises what criteria underpin each rating.

Remit Rating	Criteria
Green	The pay remit will be rated as Greenif all of the following apply: Proposals (including the use of flexibilities) are within the pay policy framework and recognised benchmarks. Projected paybill costs and staffing numbers are consistent with the budget allocations. Proposals are affordable and sustainable, including any proposed savings - particularly those resulting from changes in staffing or terms and conditions - given their knowledge of the public body and its current and future budget and workload.
Amber	The pay remit will be rated as Amber if any of the following apply: Proposals are within the pay policy framework, and include the use of the 0.5% flexibilities allowance which might be contentious or could set a precedent across the wider public bodies covered by Public Sector Pay Policy. Additionally, the following must all apply: Projected paybill costs and staffing numbers are consistent with the budget allocations. Proposals are affordable and sustainable, including any proposed savings - particularly those resulting from changes in staffing or terms and conditions - given their knowledge of the public body and its current and future budget and workload.
Red	The pay remit will be rated as Red if any of the following apply: The current proposals are outwith the pay policy framework A use of the 0.5% flexibilities is proposed which is judged to be contentious.

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

3.116 Where a public body has been assigned to the fast-track process then their proposals are able to be approved off by Senior Officials within the relevant sponsor area. The Deputy Director for Budget and Public Spending and the Public Sector Pay Policy team should be copied in to all proposals that are submitted for portfolio approval.

3.117 The Sponsoring Senior Official has the opportunity to refer any proposals to Remuneration Group for further consideration. Once the pay remit has been approved, the public body can then engage in formal pay negotiations. They are able implement the negotiated pay award without further recourse to the Scottish Government, if it is within the terms of the approved remit. If there are any changes to the approved remit then the public body should speak to the Public Sector Pay Policy team before concluding pay negotiations (see paragraphs 3.148 to 3.149).

3.118 The public body would then be required to submit a settlement proforma within one month of the pay award being implemented (see paragraphs 3.150 to 3.151).

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

3.119 Where a public body has been assigned to the full pay remit process then their pay proposals would require to be approved by the Scottish Government's Remuneration Group. 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.

3.120 Once the pay remit has been approved the public body is able to engage in formal pay negotiations with its trade unions. It is then able to implement the negotiated pay award without further recourse to the Scottish Government if it is within the terms of the approved remit. If there are any changes to the approved remit then the public body should speak to the Public Sector Pay Policy team before concluding pay negotiations (see paragraphs 3.148 to 3.149).

3.121 All public bodies are required to submit a settlement proforma within 1 month of the pay award being implemented (see paragraphs 3.150 to 3.151).

What if the proposals are not assigned a pay remit process?

3.122 If the current remit proposals are not considered to be within policy, 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?

3.123 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

3.124 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
NDPB or Public Corporation	Director of the relevant Sponsor Directorate[16]
Agency	Director General[17] of the relevant Sponsor Directorate
Associated department	Permanent Secretary

3.125 The Deputy Director for Budget and Public Spending and the Public Sector Pay Policy team should be copied in to all proposals that are submitted for portfolio approval.

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

Remuneration Group

3.127 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	Director17 of the relevant Sponsor Directorate
Agency	Director General18 of the relevant Sponsor Directorate

3.128 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 Public Sector 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, to seek further information or to refer them to Ministers.

Ministers

3.129 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 and the relevant Portfolio Cabinet Secretary or Minister.

3.130 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?

3.131 Where a public body is assessed to the fast-track process the aim will be to approve this within four weeks.

• This provides for up to two weeks for assessing the outturn and remit proposals and resolving queries with the Public Sector Pay Policy team, Sponsor team (where applicable) and Finance Business Partner. While the aim is to conclude this assessment within a couple of weeks, 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 Public Sector Pay Policy team will try and advise on the likely length of time that might be required.
• It could then take up to two weeks for the formal approval of proposals by Senior Officials within the sponsor area.

3.132 Please note that if the proposals are referred to Remuneration Group then this may take longer than four weeks. See paragraph 7.9.

3.133 Where a public body is required to submit a full pay remit the aim will be to approve this within seven weeks.

• This provides for up to four weeks for assessing the outturn and remit proposals and resolving queries with the Public Sector Pay Policy team, Sponsor team (where applicable) and Finance Business Partner. The aim is to conclude this assessment within two 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 Public Sector Pay Policy team will try and advise on the likely length of time that might be required.
• It could then take up to three weeks for the formal approval of proposals. During these three weeks, the formal submission will be prepared and submitted to Remuneration Group for approval.

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

3.135 To achieve the above timescales, it is important that the proposal each public body submits to the Public Sector Pay Policy team includes all the necessary information, and the public body responds timeously to any queries raised. The Public Sector Pay Policy team will aim to provide feedback on the initial proposals within five working days.

3.136 The Remuneration Group meets regularly throughout the year and meeting dates and the deadlines for papers are set out on the Scottish Government's Public Sector Pay webpages, available at: Remuneration Group.

3.137 All papers must be with the Remuneration Group Secretariat three clear working days before the relevant Remuneration Group meeting and must be cleared in advance by the Public Sector Pay Policy Team. Failure to meet this deadline will result in delays to the proposals being considered. Further information is provided in paragraphs 7.8 to 7.9 on what is expected to be considered and timescales for preparing a submission. If the deadlines set out at paragraph 7.9 for the submission of papers are missed, the proposals will be added to 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.

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

3.138 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?

3.139 All public bodies are required to complete a settlement proforma, within one month of the pay award being implemented, 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 2022-23 (see paragraph 3.112).

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

3.140 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 Public Sector Pay Policy team.

3.141 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)?

3.142 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/or their remit for formal approval.

3.143 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.

3.144 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).

3.145 If during pay discussions or negotiations any points arising regarding the application of the pay policy, public bodies and/or their trade unions are encouraged to speak with the Public Sector Pay Policy team to seek clarification.

What is the policy on legal commitments?

3.146 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).

3.147 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?

3.148 If, during negotiations, a public body is considering: entering into an agreement that exceeds the key pay metric percentages approved in its remit, or; deviating from the basis of approval, then the public body will need to contact the Public Sector Pay Policy team. 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 Public Sector Pay Policy team consider them novel or contentious.

3.149 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 Public Sector 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 Public Sector 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 3.152 to 3.154.

Staff pay settlements

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

3.150 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 Public Sector Pay Policy team within one month of a public body's pay award being implemented. Failure to do will result in the following year's remit risk assessment defaulting to Amber.

3.151 Public bodies should contact the Public Sector 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?

3.152 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 the 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 the pay remit proposals, then they will be considered to have exceeded the approved pay remit.

3.153 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 Public Sector Pay Policy team at the earliest opportunity. The Public Sector Pay Policy team will advise if the changes require to be considered by Remuneration Group.

3.154 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. 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

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

The example is based on a public body with 140.0 FTE across nine grades and includes seasonal staff.

Current pay structure for staff (£)

Grade	Min	Min+1	Min+2	Min+3	Min+4	Max
A	18,350	18,850	19,350			19,850
Seasonal						23,750
B	23,750	24,500	25,250	26,000		26,750
C	28,000	28,750	29,500	30,250		31,000
D	32,000	32,750	33,500	34,250	35,000	35,750
E	38,500	39,500	40,500	41,500	42,500	43,500
F	45,500	47,000	48,500	50,000	51,500	53,000
G	56,000	58,000	60,000	62,000	64,000	66,000
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	1.5	2.0			8.5
Seasonal						5.5
B	3.0	6.0	7.0	3.0		10.0
C	5.0	7.0	6.5	4.5		21.0
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	0.5	0.5	1.0

Base salary costs (£)

Total net baseline paybill for all staff, of which:	Cost £4,684,900	FTE 140.0
Below the Lower pay threshold of £25,000	£621,275	28.5
Between the Lower and Intermediate pay thresholds: £25,000-£40,000	£2,428,375	80.5
Above the Intermediate pay threshold of £40,000	£1,635,250	31.0

Summary of the proposals and costs for the proposed award as a percentage of baseline paybill:

Increase applied (1)	Cost	Percentage of base salaries
Applying progression under existing arrangements	£67,000	1.43%
£10.50 wage floor (2)	£16,170	0.35%
£775 for those earning a fulltime equivalent salary of £25,000 or less (3)	£23,063	0.49%
£700 for those earning a fulltime equivalent salary of between £25,000 and £40,000 (4)	£57,050	1.22%
£500 basic pay increase for those earning £40,000 and above	£15,500	0.33%
Flexibilities	£23,600	0.50%
Total	£201,407	4.32%

(1) The basic pay increases are pro-rated for part-time employees

(2) This is the cost of introducing a £10.50 wage floor. It includes all costs above applying the £775 basic pay increase as well as additional increases on the other pay points in Grade A to maintain the integrity of the existing pay steps.

(3) This includes £975 to provide a top-up staff in Grade B on pay points which are just above the Lower Pay Threshold (£25,000) and meet the 50% criteria (see worked example at paragraph 3.43).

(4) This includes £700 to provide a top-up staff in Grade E on pay points which are just above the Upper Pay Threshold (£40,000) and meet the 50% criteria (see worked example at paragraph 3.43).

The flexibilities are costed as follows:

Flexibility	Cost	Percentage of baseline paybill
Cost of providing a consolidated top-up to £775 for staff in Grade B more than 50% above the LPT (£25,000)	£975	0.02%
Cost of providing a consolidated top-up to £700 cash for staff in Grade E more than 50% above the IPT (£40,000)	£1,900	0.04%
1% non-consolidated payment to staff on the maxima in grades B-H	£20,725	0.44%
Total	£23,600	0.50%

(1) This is costed under the flexibilities as more than 50% of the pay point is above the £25,000 Lower pay threshold. (see worked example at paragraph 3.43).

(2) This is costed under the flexibilities as more than of the pay point is above the £40,000 Intermediate pay threshold. (see worked example at paragraph 3.56).

Proposed pay structure after applying just the basic pay increases (£)

Grade	Min	Min+1	Min+2	Min+3	Min+4	Max
A	20,280	20,780	21,280			21,780
Seasonal						24,525
B	24,525	25,275	25,950	26,700		27,450
C	28,700	29,450	30,200	30,950		31,700
D	32,700	33,450	34,200	34,950	35,700	36,450
E	39,200	40,200	41,000	42,000	43,000	44,000
F	46,000	47,500	49,000	50,500	52,000	53,500
G	56,500	58,500	60,500	62,500	64,500	66,500
H	70,500	73,000	75,500	78,000	80,500	83,000

Proposed pay structure after applying basic pay increases and flexibilities (£)

Grade	Min	Min+1	Min+2	Min+3	Min+4	Max
A	20,280	20,780	21,280			21,780
Seasonal						24,525
B	24,525	25,275	26,025	26,775		27,525
C	28,700	29,450	30,200	30,950		31,700
D	32,700	33,450	34,200	34,950	35,700	36,450
E	39,200	40,200	41,200	42,200	43,200	44,200
F	46,000	47,500	49,000	50,500	52,000	53,500
G	56,500	58,500	60,500	62,500	64,500	66,500
H	70,500	73,000	75,500	78,000	80,500	83,000

Staff profile after applying the pay award ( FTE)

Grade	Min	Min+1	Min+2	Min+3	Min+4	Max
A	1	1	1.5			10.5
Seasonal						5.5
B	0	3	6	7		13
C	0	5	7	6.5		25.5
D	0	1	1	2	1	8
E	1	1	1.5	2	1.5	8
F	0	1	1	1.5	2	5
G	0	0	1	0	1	4
H	0	0	1	0	0.5	1.5

3A. Public Service Reform Approach to Public Sector Pay

Pay and public service reform

3.156 The 2022-23 pay policy strongly signals pay as an investment in the public sector workforce which delivers top class, person-centred public services for all in its strategic aims. When the Scottish Government publishes the Resource Spending Review in May, this will cover the period to 2026-27. It will give a platform and set the conditions for enabling public service reform with a focus on improving outcomes for people, places and communities across Scotland.

3.157 The pay policy recognises the challenges that employers can face in responding to changes in demand for services and delivering wider workforce reform, including consideration of a reduced working week. In order to support employers in delivering the strategic aims of the pay policy and wider Government priorities, the policy includes the option for employers, in discussion with their trade unions, to either:

• apply the single year 2022-23 pay policy as set out in detail below; or
• take a multiple year approach to pay enabling a more strategic approach to support achieving public service reform, particularly with reference to delivering genuinely joined up, holistic, person-centred services. This allows employers to apply increases outwith the set metrics but within an overarching framework subject to affordability and sustainability.

3.158 This option enables employers to apply paybill increases outwith the set metrics above but within an overarching framework subject to affordability and sustainable public finances. This includes going beyond the discretion on shorter working week, allowable in the 2022-23 metrics, to explore the potential participation in a four day working week pilot.

3.159 This section covers the type of things that should be considered as part of the reform option.

What are the key features of the reform option for 2022-23?

3.160 The 2022-23 Public Sector Pay Policy includes the option for employers to take a multiple year approach to pay, enabling a more strategic approach to achieving public service reform. This must be done in consultation with relevant staff representatives and/or trade unions.

3.161 This approach allows employers to apply pay uplifts outwith the 2022-23 pay policy metrics. Taking a strategic, multiple year approach to pay:

• will provide more financial certainty for both employers and employees on the future pathway of pay;
• allows employers to work towards standardising to a 35 hour working week and to explore the potential participation in a four day working week pilot;
• will help facilitate reform that enables the organisation to realise efficiency savings.

3.162 The key principles of the 2022-23 pay policy set the overarching framework for any public service reform approach to pay. These are:

• To invest in our public sector workforce which delivers top class, person-centred public services for all, supports employment and the economy, while providing for sustainable public finances.
• To provide a distinctive, progressive pay policy which is fair, affordable, sustainable and, delivers value for money in exchange for workforce flexibilities.
• To reflect real life circumstances, protect those on lower incomes, continue the journey towards pay restoration for the lowest paid and recognise recruitment and retention concerns.
• A continuing commitment to No Compulsory Redundancy.

3.163 Employers seeking to take a public service reform approach to pay will be required to submit a business case in line with these overarching principles which includes an implementation approach. Business case guidance is included in this document.

3.164 The pay policy does not apply to the remuneration of Senior Civil Servants as this is a reserved matter and operates within the UK Cabinet Office pay and performance management framework.

3.165 The policy is available on the Scottish Government website at: Scottish Government Public Sector Pay Policy for 2022-23.

Areas of public sector pay policy that can be considered and business case process

What metrics can be changed as part of the reform public sector pay option?

3.166 The reform option allows for organisations, in conjunction with engagement from trade unions, to agree pay parameters out with the single year 2022-23 pay policy option.

3.167 The table below provides a non-exhaustive list of the 2022-23 single year policy features that could be considered as part of a multi-year year pay reform option.

Feature	2022-23 Policy Parameter	Potential flexibility within multi-year reform option for 2022-23 and future years
Living Wage of £10.50	A guaranteed wage floor of £10.50 per hour	A guaranteed wage floor of £10.50 per hour. Future years subject to overall progressivity of proposals
Paybill award	A guaranteed cash underpin of £775 for public sector workers who earn £25,000 or less; providing a basic pay increase of £700 for those public sector workers earning between £25,000 to £40,000; provide a cash uplift of £500 for public sector workers earning above £40,000	Flexibility available - subject to progressivity of proposal and protecting lowest earners
Paybill flexibilities	Allowing flexibilities for employers to use up to 0.5 per cent of paybill savings on baseline salaries in 2022 to address clearly evidenced equality or pay coherence issues	Not only constrained by paybill savings towards baseline salaries
35 hour working week	Continues to encourage employers to work towards standardising to a 35 hour working week	Continues to encourage employers to work towards standardising to a 35 hour working week
Four day working week pilot	Exceptional four day working week pilot cases will be considered	Flexibility to explore being part of pilot
Right to Disconnect	Requirement for employers to have meaningful discussions with staff representatives about the Right to Disconnect	Requirement for employers to have meaningful discussions with staff representatives about the Right to Disconnect
Pay progression	Discretion for individual employers to reach their own decisions about pay progression	Discretion remains but ensuring existing arrangements support reform
Non-consolidated performance related pay	Maintains the suspension of non-consolidated performance related pay (bonuses)	Maintains the suspension of non-consolidated performance related pay (bonuses)
Chief Executive pay limits	Expectation to deliver a 10 per cent reduction in the remuneration packages for all new Chief Executive appointments plus limits on pay increases	Expectation to deliver a 10 per cent reduction in the remuneration packages for all new Chief Executive appointments plus limits on pay increases
No compulsory redundancy	Continues a commitment to No Compulsory Redundancy	Continues a commitment to No Compulsory Redundancy

Overview of business case guidance

3.168 A business case is required for employers (in partnership with trade unions) who seek to approach their pay policy through the lens of achieving public service reform. Employers should demonstrate a clear link showing how the proposals will benefit and improve outcomes for those people using the organisation's services as well as the wellbeing of staff.

3.169 When submitting a business case, employers must demonstrate they have considered and met the following overarching principles throughout their proposals:

• Investment in workforce: proposals must deliver long-term, person-centred changes to delivery and demonstrate improvements in productivity.
• Sustainable public finances:delivers cost-neutral savings and efficiencies to the paybill from early in the lifecycle of the multiple year pay proposals.
• Progressive pay policy:demonstrate how proposals are progressive and protect those on lower incomes throughout the lifecycle of the proposals.
• Wellbeing:demonstrate how wellbeing has been considered. Proposals may comprise the consideration of a reduced working week, including potential participation in a four day working week pilot, and how this will be achieved within allocated funding.
• No Compulsory Redundancy:where restructuring is required to achieve the reform approach, business cases must include details of any redeployment or re-training proposals and of how the Severance Policy for Scotland will be used for any proposed voluntary exits.

3.170 Business cases can be submitted through the corresponding 'Public sector pay reform option. Before completing and submitting a business case we recommend for employers to arrange an initial exploratory conversation with Scottish Government Public Sector Pay Policy Team (email: FinancePayPolicy@gov.scot).

Approvals and submission process

3.171 Public bodies should submit their business case to the Public Sector Pay Policy and Sponsor teams (where applicable) at the same time.

3.172 The business case will be reviewed by the Public Sector Pay Policy team to ensure the proposals provide sufficient detail. For longer-term and more complex cases, expertise from the Public Spending team may be used. If this is the case full disclosure with the employer will be made.

3.173 The Sponsor team along with the Finance Business Partner will consider the business case in the context of business delivery and value for money. The Finance Business Partner will also consider the wider read across.

3.174 As long as it is agreed that the proposals meet the objectives of the reform option, and both the Sponsor team and the Finance Business Partner are content any proposals can be approved by the sponsor director and will not need to go to the Scottish Government's Remuneration Group for approval. The Public Sector Pay Policy team will provide an update to Remuneration Group as part of the pipeline report. However any proposal which could be considered as contentious or has a risk of wider read across would require to be referred to Remuneration Group.

3.175 Further details of the type of information needed for the business case categories in paragraphs 3.169 to 3.170 above is discussed below.

Guidance on completing business case form

Flexibilities being applied for multi-year deal

• Provide detail on the flexibilities that are being proposed in comparison to the single year pay policy option
• If helpful, the table set out earlier in this document can be used

Investment in workforce

• Proposals must deliver long-term, person-centred changes to delivery and demonstrate improvements in productivity.
• The business case might show specific areas on how the workforce within the organisation can become more productive as a result of the reform changes.
• The business case should demonstrate how wellbeing has been considered. Proposals may comprise the consideration of a reduced working week, including potential participation in a four day working week pilot, and how this will be achieved within allocated funding.
• It would help if this section contained details of the short-term and longer-term effects of the reform option. For example, it might be the case that there will be shorter term disruptions to productivity before longer-term gains to productivity can be realised.

Sustainable public finances:

• Delivers cost-neutral savings and efficiencies to the paybill from early in the lifecycle of the multiple year pay proposals.
• This section should include an appropriate baseline paybill over the multi-year time period being proposed. The assumptions for this should be clearly detailed.
• It should also show what the expected paybill will be after the reform option is implemented. As with the baseline calculation, assumptions should be set out clearly.

Progressive pay policy:

• Demonstrate how proposals are progressive and protect those on lower incomes throughout the lifecycle of the proposals.
• The awards offered, and the split by income band, may differ from the single year 2022-23 pay policy. But the overall policy should remain progressive, protecting the lowest paid.
• The commitment to the £10.50 wage floor must be maintained.

Wellbeing

• Demonstrate how wellbeing has been considered. Proposals may comprise the consideration of a reduced working week, including potential participation in a four day working week pilot, and how this will be achieved within allocated funding. See paragraphs 3.82 to 3.87 for further detail on the 35 hour working week framework.

No Compulsory Redundancy

• Where restructuring is required to achieve the reform approach, business cases must include details of any redeployment or re-training proposals and of how the Severance Policy for Scotland will be used for any proposed voluntary exits.

Trade union and/or staff engagement

• Provide details on how trade unions and/or staff have been engaged regarding the proposal

Equality impact assessment of the proposed changes

• Please confirm that an Equality Impact Assessment has been undertaken and provide the key findings

Questions and Answers

How will the reform approach work in practice?

3.176 As this is a choice, employers and trade unions can agree to take this approach instead of applying a single year policy. Multi-year spending plans will be available in May to facilitate this but conversations can start in advance of this.

3.177 Pay increases outwith the 2022-23 metrics will be allowable, subject to a business case that demonstrates joined up, holistic, person-centred changes to public services and wellbeing benefits to the workforce underpinned by affordability.

3.178 Business cases will be considered by sponsor team, pay policy and finance business partners and the Remuneration Group (as required). You will still be required to complete a pay remit proforma indicating your decision to take a reform approach.

3.179 Decisions will be taken on a case by case basis, without prejudice to the overarching pay policy principles or to the single year policy.

Are any changes expected to Employer Pension Contributions that need to be taken into account if considering the reform approach?

3.180 Employer Pension Contributions are an element of on-costs. Employers participating in one of the unfunded public service pension schemes (NHS, Teachers, Police, Firefighters, Civil Service and Judicial pension schemes) should be aware that the current employer pension contribution rates will remain in effect until 31 March 2024. New rates will be set via the 2020 actuarial valuations and implemented from 1 April 2024.

3.181 We do not yet know what the new rates will be, whether they will increase and if so, by how much. Those employers participating in the Local Government Pension Scheme will be aware that their employer pension contribution rates are set by their pension fund via the local actuarial valuation and will remain in effect until 31 March 2024.

Can a multi-year deal start from 1 April 2023 rather than 1 April 2022?

3.182 Yes, employers can choose to submit proposals for a multi-year deal starting from 1 April 2023 but must pay the 2022-23 metrics from 1 April 2022. The option to consider reform will be a feature of future pay policies.