Public sector pay policy for senior appointments 2019-2020: technical guide

3. Chief Executives: Framework

Who is it for?

3.1 Sections 3 and 4 of this Technical Guide apply to Chief Executives and, in exceptional circumstances (and only with prior approval), Directors who are not covered by the public body's pay remit. Any proposals to appoint a temporary or interim Chief Executive is also subject to this policy (see Annex A, sections 1.36 to 1.39).

3.2 Approval will also be required if any changes to a public body's staff handbook are being proposed which will have the effect of amending or revising any aspect of those elements of a Chief Executive's reward package covered by the Pay Policy.

3.3 For guidance on applying the pay policy to the appointment of a Chief Executive to new public body; the appointment of a new Chief Executive to an existing body; and when a review of an existing Chief Executive's remuneration package is being undertaken (including, for example, the introduction of or changes to non-pay rewards, such as a car, etc. or revisions to pension arrangements (for example: increases in employer's contributions) where these are not mandatory), please see Annex A.

3.4 While it is normally good practice to review the remuneration arrangements on a regular basis, the Scottish Government would not expect a review of the Chief Executive's remuneration package to be undertaken unless there has been a significant change in the role and responsibility of the post.

3.5 The fact that a Chief Executive may have reached the maximum of the existing pay range or has fallen behind the market is not sufficient justification to review the pay range. Nor should the existing remuneration be used solely as the basis for establishing the new minimum of a proposed pay range.

3.6 The extent to which an appointment requires actual Ministerial approval is dependent on the legislative arrangements for that particular public body. However, in all cases, Scottish Government approval of the proposed remuneration package is required before the post is advertised; contracts agreed; or the appointment is made. Potential remuneration packages should not be discussed with prospective candidates until Scottish Government approval has been given.

What are the Scottish Chief Executive Pay Bands?

3.7 In order to ensure consistency and fairness between the remuneration of senior staff employed in Scottish Government Agencies and Associated Departments, who are civil servants (and members of the Senior Civil Service) and that for Chief Executives in public bodies covered by the Pay Policy, the salary and pay range of a Chief Executive must fall within the Scottish Chief Executive Pay Bands. While there is an element of read‑across between the Scottish Chief Executive Pay Framework and the Senior Civil Service Pay Framework, Chief Executives of NDPBs and Public Corporations are not civil servants and are neither subject to the Senior Civil Service Pay Framework nor its operation.

3.8 The Scottish Chief Executive Pay Bands are uplifted reflecting the pay thresholds in 2019‑20 as follows:

Scottish Chief Executive Pay Bands 2019-20 (base pay)

3.9 The Scottish Chief Executive Pay Bands operates on the basis of base pay with salary and pay ranges excluding any non‑consolidated performance payment (bonus), pension and the cash value of any non‑salary rewards. Some evaluation systems also refer to total cash reward which might include a non‑consolidated performance payment or bonus, pension and the cash value of any other non-salary rewards, but this should not be used in determining the market median for this purpose. However, the business case may set out differences in pension contributions, etc. if this is considered relevant.

3.10 The salary and pay range of a Chief Executive is expected to lie within the minimum and maximum of the relevant Scottish Chief Executive Pay Band. The business case in support of proposals must include clear and convincing market evidence to support the proposed pay range. In exceptional circumstances the business case may include proposals for a maximum which extends beyond the maximum in the relevant Pay Band but only where there is robust market evidence in support of this. In all cases, the proposed pay range maximum must be within the ceiling of the relevant Pay Band within the Scottish Chief Executive Pay Framework and is expected to remain so. The minimum, maximum or ceiling of the Pay Band should not be taken as the Chief Executive's pay range.

3.11 The pay policy expectation is that a Chief Executive should be remunerated by way of a pay range (allowing individuals to progress, through the delivery of agreed objectives and by gaining experience, towards the maximum of the pay range which should reflect the market rate for the job). This is principally for two reasons. First, it provides that annual pay rises are, in part, based on performance; and secondly, provides a further incentive for a Chief Executive to perform well as they increase their knowledge and experience of the role. Only in exceptional circumstances would the appointment of a new Chief Executive on a spot rate be considered for approval (which reflects the market rate for the job).

How is a Chief Executive to be paid?

3.12 Chief Executives are expected to be paid through payroll with tax deducted at source in the same way as other employees. Payments must comply with the Tax Planning and Tax Avoidance section of the Scottish Public Finance Manual:
www.gov.scot/Topics/Government/Finance/spfm/taxavoidance

What if a Chief Executive is considering a public appointment or Non‑Executive Directorship?

3.13 If a Chief Executive (or other senior employee) of a body covered by the Scottish Government Public Sector Pay Policy is considering accepting a public appointment or Non‑Executive Directorship in addition to their existing role, then factors to be taken into account by the Chair / Board and Sponsor Team of the employing body include: conflict of interest; time commitment; and remuneration. Such matters, including (where relevant) the need to liaise with the Sponsor Team of the public body to which the individual might be appointed, are outlined in more detail in the Public Bodies Information Update 109 which is available on the Scottish Government website at:
www.gov.scot/publications/public-bodies-information-update-109-public-sector-pay-policy/