Public sector pay strategy 2023 to 2024: technical guide

3. Scottish Government Pay Strategy Position

Progressive pay awards

3.1 One of the strategic aims of the Pay Strategy is to provide progressive pay awards. Pay negotiations should include consideration of targeted measures for the low paid including cash underpins, alongside pay caps for high earners if appropriate, as part of delivering a progressive, affordable, and sustainable solution.

Affordability considerations

3.2 Public bodies when considering pay awards must demonstrate the affordability and sustainability of the pay award (including progression costs). The 2023-24 Scottish Budget defines the budgetary envelope and affordability for public sector pay deals.

Workforce and Fiscal Sustainability considerations

3.3 Pay metrics must balance flexibility with fairness and affordability, which may mean taking decisions on the size and shape of the workforce, alongside opportunities around, for example, digital reform, revenue generation, estates rationalisation and improved procurement. In the 2023-24 Budget, we set out that it is for individual public bodies to locally determine the target operating model for their workforces and to ensure workforce plans and projections are affordable in 2023-24 and in the medium term. Where a reduction in workforce is required, we would expect this to be through natural turnover wherever possible.

No Compulsory Redundancy commitment

3.4 The statutory definition of "redundancy" encompasses three types of situation: business closure, workplace closure, and reduction of workforce. The dismissal of an employee will be by reason of redundancy if it is "wholly or mainly attributable to" the employer.

• Business closure - ceasing or intending to cease to carry on the business for the purposes of which the employee was employed by it (section 139(1)(a)(i), ERA 1996).
• Workplace closure - ceasing or intending to cease to carry on that business in the place where the employee was so employed (section 139(1)(a)(ii), ERA 1996).
• Reduction of workforce - having a reduced requirement for employees to carry out work of a particular kind or to do so at the place where the employee was employed to work (section 139(1)(b), ERA 1996).

3.5 The intention behind Ministers' No Compulsory Redundancy commitment is to ensure that, in any of the above circumstances, the employer works closely with affected staff and their unions, to identify suitable alternative employment opportunities.

3.6 This Pay Strategy continues to support the Scottish Government's position on No Compulsory Redundancy. The Government believes this commitment creates the right environment to provide staff with job security, while enabling employers and their staff representatives to take a range of steps to manage their headcount and budgets to realise the necessary savings to deliver efficiencies. Where public bodies are seeking to re-structure, full consideration must be given to redeployment and retraining.

3.7 Public sector leaders and trade unions may need to engage on matters relating to the reduction or reprofiling of the workforce as part of pay negotiations. The strategic position remains that public bodies should work with their staff representatives to negotiate extensions to their no compulsory redundancy agreements for 2023-24 or beyond. Proposals to change the No Compulsory Redundancy commitment through the application of the Severance Policy for Scotland (extend, pause or reverse), will be considered on a case-by-case basis.

3.8 The key aim remains for public bodies to deliver quality service within constrained budgets. We look to public bodies to implement the Pay Strategy in a way that supports this alongside wellbeing and our Fair Work principles.

3.9 Where negotiated, a No Compulsory Redundancy agreement extends to all directly employed staff for the period agreed. Public bodies would be expected to look at all appropriate measures to avoid compulsory redundancy. This can include: transfer to other areas of work both within the organisation or to another public body (if agreed arrangements are in place); reviews of working practices such as reducing overtime; restricting promotions/recruitments; or restricting the use of temporary workers or fixed-term appointments, etc. The No Compulsory Redundancy agreement does not apply to the termination of a temporary appointment or the end of a fixed-term contract where staff are recruited for a limited period.

3.10 The No Compulsory Redundancy commitment may mean that employers seeking to restructure, in discussion with trade unions, may wish to consider voluntary exit schemes following consideration of re-deployment and re-training. Any public bodies seeking to do this must follow the relevant guidance in the Scottish Public Finance Manual. Further advice can be obtained by contacting severance-policy-for-scotland@gov.scot.

Fair pay and pay inequalities

3.11 The Scottish Government recognises the importance of treating people fairly in the workplace and encourages best practice among its public bodies as set out in the Fair Work Framework^[3]. This recognition is embedded in Scotland's Labour Market Strategy^[4].

3.12 The Scottish Government's Fair Work First position includes the following requirements.

• Payment of at least the real Living Wage.
• To provide appropriate channels for effective workers' voice, such as trade union recognition.
• Investment in workforce development.
• No inappropriate use of zero hours contracts.
• Action to tackle the gender pay gap and create a more diverse and inclusive workplace.
• To offer flexible and family friendly working practices for all workers from day one of employment.
• To oppose the use of fire and rehire practice.

3.13 All employers are encouraged to follow the Scottish Government's lead and have a Fair Work Agreement with their respective trade unions and/or staff representatives. The agreement between Scottish Ministers and the recognised civil service unions is available at: Scottish Government Fair Work Agreement.

3.14 It is important public bodies meet the legal duty placed upon them in the Equality Act 2010 and public bodies are encouraged to work jointly with their trade union(s) in undertaking their equal pay reviews. Further information on the Scottish Government's duties under the Equality Act 2010 is available at: Outline of Scottish Government's duties under the Equality Act 2010.

3.15 Each public body is required to make sure it has due regard to the legal requirements of the Equality Act 2010 (section 149) when considering its pay systems. To help public bodies better meet the requirements of the public sector equality duty, the Scottish Government has introduced regulations in the Equality Act 2010 (Specific Duties) (Scotland) Regulations 2012 which places a number of requirements on public authorities. This includes report on the work being done to mainstream equalities; set outcomes; publish and use employee information and to assess the impact of their policies and practices on people from with one or more of the protected characteristics listed in the Equality Act 2010. In terms of pay proposals, public bodies are expected to have carried out equal pay reviews and set out in their business case the results of such reviews and the steps they propose to take to address any inequalities they have identified.

3.16 Where a public body has identified a potential pay inequality they wish to address, they will need to provide evidence of the extent of this inequality. A full risk assessment, including the likelihood of claims and the extent of potential liability, as well as the costs of dealing with the issue, should form part of the business case. They will also need to propose ways of tackling this in a cost effective way, subject to affordability constraints and where appropriate the Pay Strategy limits. If it is not possible to make the necessary changes within the Pay Strategy limits, the relevant Sponsor team will liaise with the Public Sector Pay team and to determine whether the proposals should be put to the Remuneration Group and potentially Ministers for their consideration.

Anti-racism

3.17 The Scottish Government's new anti-racist employment strategy – a fairer Scotland for all, published December 2022, seeks to respond to the scale and prevalence of institutional racism. It supports and encourages employers across the economy to take an anti-racist approach to practices across recruitment, retention and progression. This includes the pay and employment practices of agencies and public sector organisations required to follow Scottish Government's Public Sector Pay Strategy.

3.18 Employers are encouraged to go beyond pay reporting and identify factors driving the ethnicity pay gap and take appropriate action to address these. The anti-racist employment strategy provides practical guidance, case studies and suggested actions to support employers to do so.

3.19 The Scottish Government is committed to "increase the number and impact of actions that employers are taking to address racial inequality in their workplace". Public sector employers complying with the Public Sector Pay Strategy have a key role in ensuring delivery of that ambition.

Equality Impact Assessments

3.20 All employers will be required to confirm that they have considered their obligations under equalities legislation in developing their pay proposals. Employers will be expected to review their pay systems on an annual basis, and ensure they carry out a full Equality Impact Assessment of their reward policies and practices.

3.21 The Scottish Government is committed to ensuring pay systems in the public sector are fair and non‑discriminatory and has published an Equality Impact Assessment in relation to the 2023-24 Public Sector Pay Strategy, which is available at: Scottish Public Sector Pay Policy - Equality Impact Assessment.

3.22 Public bodies are expected to carry out their own Equality Impact Assessment of their pay proposals as they develop them to ensure that there are no unintended consequences of the proposed pay award. They should consider the impact on different groups of staff or roles including considering the impact of reward policies on those with a protected characteristic as well as the potential impact on lower paid employees and working families. This should also consider the appropriate length and progression journey time for all jobs, in line with equalities legislation.

3.23 Undertaking an Equality Impact Assessments should already be an embedded practice for Scotland's public sector employers. The range and quality of impact assessments should be reviewed to ensure compliance with the revised National anti-racist strategy. Employers following the Pay Strategy should, therefore, already gather and hold comprehensive pay and employment data disaggregated by protected characteristics including race. Where necessary, data gathering and policy monitoring should be strengthened to enable a rigorous analysis of the baseline against which revised anti-racist measures can be assessed.

Wellbeing

3.24 The Scottish Government is committed to promoting wellbeing of all people living in Scotland. Employers are required to actively look at how they can promote wellbeing in their workplace to support a positive and healthy work-life balance. Public bodies will be expected to outline their wellbeing strategy and identify any changes they propose to introduce during 2023-24.

3.25 The Pay Strategy builds on changes to working practices over the past three years because of the COVID-19 pandemic. Many employers have introduced more flexible working practices as part of their response to supporting staff. Examples of such practices have included reviewing HR policies on caring responsibilities, home-schooling, special leave and sick leave; and extending core working hours (where it is agreed between employees/Trade Unions/staff representatives and employers), to enable staff to work at times that are more suited to their home environment or domestic situation; ensuring that employer obligations in relation to duty of care and health and safety are met; and some may have provided regular articles on looking after the mental, emotional and physical wellbeing of the individual.

3.26 The 2023-24 Pay Strategy strongly encourages employers to standardise to a 35 hour working week. This applies to all public bodies with an existing working week of more than 35 hours. Consideration of reduction in working hours should form part of normal pay negotiations as part of a progressive and agreed package of measures including terms and conditions that support new ways of working. Where an employer is looking to work towards a 35 hour working week they will be required to seek approval from the Scottish Government. For further detail see paragraphs 4.45 to 4.50. 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 service delivery.

3.27 The 2023-24 Pay Strategy also maintains our commitment to beginning a four-day working week public sector pilot. Work has already begun to identify public sector bodies who are interested in participating in the pilot, and how to best design the pilot. The outcome of the pilot will inform the future policy direction in this area.

Right to Disconnect

3.28 This Pay Strategy expects all employers to have implemented or agreed a Right to Disconnect policy for all staff, discouraging an "always on" culture. This aims to provide a balance between the opportunities and flexibility offered by technology and the need for staff to feel able to switch off from work. It is expected that employer and trade union discussions will include consideration of best practice around wellbeing, working hours and the use of technology.

3.29 A Right to Disconnect policy gives employees the permission to disconnect from work outside of normal working hours and refrain from engaging in work-related electronic communications, such as emails or other messages, during non-work hours.

3.30 Right to Disconnect is fundamentally a matter for discussion between employers and their trade unions/staff representatives although the Pay Strategy would advocate it as good practice for employers to develop their own policies on this.

Pay coherence

3.31 In the context of the Pay Strategy, pay coherence is defined as the move towards greater consistency in rates of pay for roles with the same job weighting in public bodies covered by the Public Sector Pay Strategy. Pay coherence can also refer to greater standardisation of allowances and terms and conditions. The expectation for public bodies intending to address pay coherence issues is that Scottish Government (as the largest employer) will be the main benchmark both for salary levels and for terms and conditions. A working group will explore the potential options and issues associated with pay coherence.

Pay increases for part-time employees

3.32 The Pay Strategy intention is for all increases to be based on an individual's full-time equivalent salary so that part-time employees will receive all increases on a pro-rata basis. 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 job weight the same proportionate increase ensuring equal pay for like work or work of equal value (see paragraphs 4.30 to 4.32 for more detail).

Suspension of non-consolidated performance payments

3.33 The Pay Strategy position remains that all non-consolidated performance payments (bonuses) remain suspended. This approach allows public bodies to maximise the resources available to them to address fair pay issues and pay awards. The suspension applies to all non-consolidated performance payments (normally based on performance in the preceding year).

Pay proposals that cover more than one year

3.34 The 2023-24 Pay Strategy continues the option for employers, in discussion with their staff representatives, to either apply the single year 2023-24 Pay Strategy or take a multi-year approach to pay enabling a more strategic approach to support achieving public service reform.

3.35 It is unlikely that pay proposals above the central metric for more than one year that do not include an element of reform will be approved. Where a public body wishes to consider this, they should contact their Sponsor team (where applicable) and the Public Sector Pay team at the earliest opportunity.

Deviation from the Public Sector Pay Strategy

3.36 If any pay awards are implemented or Daily Fees are introduced without approval or increased beyond that for which approval had been obtained previously, the Sponsor Director and the Accountable Officer will be required to explain the matter to the Remuneration Group who may refer to Ministers. This could result in punitive action being taken by the Scottish Government, such as the recovery of any overpayments, the capping of future increases or a governance review of the public body.

Data Protection

3.37 All personal data collected as part of the Pay Strategy process is handled in accordance with the requirements of data protection legislation and in particular the principles of the General Data Protection Regulation (GDPR) and the Data Protection Act 2018 (DPA 2018). Any personal data collected as part of the staff pay remit process is solely for the purposes of evaluating the costs of the current Pay Strategy, modelling the impact of future Pay Strategy and helping shape the Scottish Government's strategic views about the public sector workforce. Any information published by the Public Sector Pay team will ensure individuals cannot be identified.

3.38 Individual public bodies are responsible for ensuring they have due regard to their obligations under General Data Protection Regulation (GDPR) when providing information to the Scottish Government as part of the Pay Strategy process. Public bodies are not asked to provide names of individual staff members.

3.39 To mitigate the risk of any inadvertent data protection breaches, public bodies are requested to identify any information that carries a risk or potential risk of identifying an individual staff member.

Data Sharing Agreements - lawful basis for processing

3.40 In the context of lawful basis for processing in Data Sharing Agreements, the Pay Strategy has a lawful basis. Most statutory bodies give control of pay to the Scottish Government either in their constitution or a memorandum of understanding. Generally, a pay strategy is necessary to run the Scottish Administration and legal cover for running that body is in section 65 of the Scotland Act which allows for the financing of the Scottish Administration provided there is budgetary cover in annual budget acts.

Timeliness of remit proposals

3.41 Scottish Ministers have highlighted the importance they place on individuals being paid on or close to their recognised settlement date. To help achieve this, all parties taking forward the pay process should endeavour to adhere to the agreed timescales. While paying employees on their recognised settlement date is important, we recognise there is due process to follow in delivering this which can cause unavoidable delay and would ask that public bodies keep their Sponsor Team up to date on progress with pay negotiations. Sponsor Teams are required to update the Public Sector Pay team regularly, and provide the information required for status reports.

Required information

3.42 Public bodies will be issued with the relevant proformas, business case template and guidance which set out the information they are required to provide to enable them to seek approval for their proposals. Public bodies are required to provide information on the costs of applying their maximum negotiating remit, their pay and grading structure and staffing profiles as well as details of their non-salary benefits.

3.43 The business case template requires information on the actions taken to ensure the pay award is financially sustainable within the resources available to a public body (recognising that these resources reflect the Government's priorities). This should also provide details where possible on how savings will be delivered.

3.44 Where remuneration proposals are being developed for new public bodies or for public appointments not linked to a public body, Sponsor teams should contact the Public Sector Pay team for advice on what information is required.