Public sector pay policy 2024-2025: equality impact and fairer duty assessment

4. Background

Equality legislation means we must assess the likely equality impact of the proposed Public Sector Pay Strategy and publish the results. This duty is set out in the Scottish Specific Duties under the Public Sector Equality Duty (PSED), often referred to as the general equality duty. The aim of the PSED is to help the public sector to promote equality, tackle discrimination and foster good relations between people.

The purpose of undertaking the Equality Impact Assessment (EQIA) is to test the proposed Pay Policy against the needs of the general equality duty in the Equality Act 2010, and to considering how it will affect people when implemented. The EQIA examines how the proposed Pay Policy might impact on different people and groups, what steps are taken to prevent discrimination and to identify opportunities to promote equality.

The Fairer Scotland Duty places a legal responsibility on named public bodies in Scotland to actively consider how they can reduce inequalities of outcome caused by socio-economic disadvantage when making strategic decisions. The FSDA looks the socio-economic of the proposed options, in particular for those on lower incomes.

The primary purpose of the Pay Policy is to enable employers to set pay increases in a way which is fair, reflects the real life circumstances people face while helping to sustain public sector jobs and protect public services within the tight financial position resulting from the continuing real terms reduction in the Scottish Government’s resource budget to ensure that that pay rises are affordable now and in the future.

In considering the pay metrics, we have taken account of the cost of living. The latest CPI for April 2024 is 2.3% down 0.9% from 3.2% in March. The Bank of England’s Monetary Policy Committee’s forecast showed price growth falling to the 2 per target in the second quarter of this year, before returning to roughly 3 per cent by the end of March 2025.^[2] This means prices would still be rising^[3], but they would be only rising gradually. Forecasters predict UK inflation could hold around the Bank of England’s 2 per cent target for the next three years. We have also taken in to account the Scottish Government’s progressive approach to the Scottish Rate of Income Tax.

It is proposed to retain the underlying principles of the 2023-24 pay policy with the key change being the determination of the level of the pay metrics. The 2023-24 pay policy set out the framework to deliver fair, affordable, sustainable and value for money for devolved public sector pay in Scotland. The Scottish Government's pay policy is based on the following strategic objectives:

• Investment in Public Services: To invest in our public sector workforce to deliver top class, person-centred public services for all, supporting employment and the economy.
• Fiscal Sustainability: Pay settlements should be based upon fair and affordable cost increases in the context of fiscally sustainable public finances. Public sector employers should be transparent around the fiscal challenges.
• Reform (including workforce re-shaping): Delivering person-centred, ‘once-for-Scotland’ public services, signalling pay as an investment in the public sector workforce. The Scottish Government’s Resource Spending Review, published in May 2022 provides a platform and sets the conditions for enabling public service reform with a focus on improving outcomes for people, places and communities across Scotland

The pay negotiation principles underpinning this will be based on the following:

• Fair: A commitment to promoting open, honest and meaningful dialogue between all stakeholders including Trade Unions and employer representatives.
• Progressive: Pay settlements must be progressive and protect the lowest paid. In addition, all employers covered by the pay policy are required to pay at least the real Living Wage (currently £12.00 per hour) Any basic pay increase for the Chief Executive should not exceed the cash amount proposed for staff in the lowest grade within each public body nor result in the Chief Executive receiving a higher percentage than that proposed for any other senior staff in the organisation. This maintains a progressive approach and helps towards reducing the pay gap between the highest and lowest earners in each organisation. The Chief Executive framework is currently being reviewed and will report in 2024.
• Continued focus on employee wellbeing: In addition we expect employers, in conjunction with engagement from Trade Unions to continue progress on key wellbeing policies including implementing a 35 hour working week over 2024-25, and the requirement for employers to have meaningful discussions with staff representatives about the Right to Disconnect. The policy will support those employers involved in the 4 Day Working Week (4DWW) public sector pilot.
• Affordable: All proposals will be expected to be delivered within the pay metrics framework. This means a 2% increase from April 2024 and a further 1% in January 2025, leading to a 2.25% increase in-year and 3% recurring. Multi-year pay metrics are also available as an option for two or three years with up to 3% available for 2025-26 and 3% for 2026-27

Within these pay negotiation principles employers will be expected to take in to account the following in developing their own pay proposals:

• Period of the award – either for a single year, two or three year proposal.
• fair and low pay measures including supporting the commitment to paying the real Living Wage and applying progressive and targeted increases to address evidenced workforce or equality issues.
• preserving the discretion for individual employers to reach their own decisions with staff and trade unions about pay progression. The cost of paying progression will be accounted for within the overall affordability of individual proposals.
• continued suspension of non-consolidated performance payments (e.g. bonuses);
• maintaining the commitment to No Compulsory Redundancy, in return for continued and, where appropriate, additional workforce flexibilities.
• retaining a cap on progression increases for senior appointments including Chief Executives and senior managers in the NHS Scotland^[4] .

The Equalities Impact Assessment was conducted on the same basis as in previous years by undertaking research using the latest available statistics to provide a baseline position of the key characteristics for employees within the Scottish public sector and then look at the impact of each of the proposed strategy.

The key sources for the assessment are as follows.

• the information published on Equality Evidence Finder on the Scottish Government’s website:
• statistical analysis using ONS data (e.g. PSE and ASHE) and
• information provided by employers in their 2022-23 pay settlement proforma (The equalities data from the 2023-24 pay remits is not yet available as the majority of employers have not yet submitted their pay settlements pending the conclusion on pay discussions).