Public sector pay strategy 2023 to 2024: technical guide

4. Staff Pay Remits

Please note this section should be read in conjunction with sections 1, 2, 3 and 5

Key Pay Strategy priorities and key metrics for staff pay in 2023-24

Key metrics used to assess pay remits

4.1 The key features of the 2023-24 Pay Strategy are set out in paragraph 1.10. Public bodies are expected to implement their 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 proposals which will be assessed on the following.

• Affordability and sustainability - the financial impact of the pay remit proposals – which includes the following.
  • The cost of the basic pay increases.
  • The cost of paying progression.
  • Any known changes to staffing over the year.
  • 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 and wider budget savings to fund pay uplifts above the 2% pay award floor metric.

Limit on the overall increase for pay

4.2 The aim of the Pay Strategy 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.

4.3 The Pay Strategy sets a pay award floor of 2 per cent, a central metric of 3.5 per cent and a ceiling of 5 per cent contingent on business efficiencies and/or paybill savings. Each public body covered by the Pay Strategy must ensure that their pay proposals are affordable within their financial settlement for 2023-24. It is the responsibility of each organisation to ensure their full paybill costs can be met from within their agreed^[5] budget provision and to adhere to the Pay Strategy metrics.

4.4 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 agreed 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.

4.5 It is a matter for individual public bodies and their trade unions/staff representatives to make decisions on their proposed pay remit and how they will meet the cost within the agreed⁶ financial settlement. Employers and their staff representatives should give consideration to securing productivity improvements and savings 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 Pay Strategy 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.

Support for Lower paid staff

4.6 Employers covered by the Pay Strategy are:

• required to pay the real Living Wage of £10.90 per hour; and
• expected to consider the suggested cash underpin of £1,500 for staff earning £25,000 or less.

Further details are set out in paragraphs 4.7 to 4.9 below.

The real Living Wage

4.7 Scottish Ministers support the payment of the real Living Wage across all sectors. Public bodies must pay at least the real Living Wage (which is set at £10.90 per hour for 2023-24). The position for Interns and Modern Apprentices is set out in paragraphs 4.28 and 4.29.

4.8 While not a Pay Strategy 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.

Basic pay increases

4.9 While the Pay Strategy is not prescriptive on the level of pay increases, the cost of the paybill uplift may be no more than 5 per cent. The Pay Strategy suggests a cash underpin of £1,500 for public sector workers who earn £25,000 or less. The suggested underpin is at least 6 per cent and public bodies can choose how to distribute the uplift as long as lower paid staff are protected and the overall cost is no more than 5 per cent.

Smoothing

4.10 If a public body proposes a cash underpin, then they may seek to provide tapered increases for staff who are on pay points that are just above the £25,000 threshold.

Pay protection and/or linking pay to performance

4.11 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.

Using paybill savings to part-fund the pay award

4.12 Public bodies can use savings (paybill or wider budget 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 Strategy 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 or budget. 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.

4.13 Public bodies may use 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.

4.14 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.

Costs to be included in the pay remit

4.15 The pay remit costings must include the cost of all^[6] 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 and reflects the aggregate value of the increases in pay and benefits existing staff will receive.

4.16 The pay remit costings should also include the costs of any changes to existing allowance rates^[7], the buying-out of existing allowances or the introduction of new allowances ⁸ that will form part of the negotiations. Changes in overtime rates or proposals for new allowances will only be considered where the cost of these can be demonstrated to be within the Pay Strategy metrics and also affordable under the agreed financial settlements. If proposals include any changes to existing terms and conditions, public bodies will be expected to consider the impact on the overall remuneration package and affordability, particularly in regard to delivering the strategy expectations for the lower paid.

4.17 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.) should also be included in the remit proforma. Public bodies will be required to provide 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 pay remit proforma, with confirmation the costs can be met within the agreed budget for the period (paragraph 4.23).

4.18 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 Strategy limits (paragraph 4.23) although the public body is required to provide confirmation the costs can be accommodated within the agreed budget for the period.

4.19 Proposals to introduce non-pay rewards such as salary sacrifice schemes also fall under this category. As above, the business case 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.

4.20 Salary sacrifice on pensions (sometimes called salary exchange) proposals are not considered acceptable. This applies to all types of pension schemes (defined contribution/money purchase and defined benefit, whether public service pension schemes or other arrangements) and all employees, including the Chief Executive. Under salary sacrifice on pensions arrangements, the employee gives up a portion of their salary in return for the employer making an additional employer pension contribution (of the identical value) to the employee's pension pot. Both the employee and the employer pay less NICs. Public sector organisations should, as a general rule, avoid tax management arrangements that have the primary objective of reducing tax liabilities, or could be perceived, reasonably, as seeking to minimise tax liability.

4.21 There is a presumption against making payments (including as a pay enhancement or lump sum) to individuals in lieu of employer pension contributions where they have withdrawn from or opted not to join the company pension scheme, whether as a result of Annual or Lifetime Allowance^[8] limits or for other reasons. All payments to individuals must comply with the Tax Planning and Tax Avoidance section of the Scottish Public Finance Manual. This paragraph applies to all employees, including the Chief Executive.

4.22 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 4.5).

• Progression (if proposed).
• Applying the real Living Wage of £10.90 per hour.
• The suggested cash underpin of £1,500 for staff earning £25,000 or less (if proposed).
• Any basic pay increase for staff.
• Any other changes to existing pay and grading structure.
• The costs of changing or introducing allowances or non-pay benefits.
• 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.

Included in Pay Strategy limits

4.23 Increases within the paybill limit set by the Pay Strategy will include the following.

• The basic award including the specified low pay measures (see paragraph 4.6).
• The cost of any payment to staff on pay protection.
• Pay inequalities.
• Any changes to existing pay and grading structures.
• Any changes or the introduction of allowances or non-pay benefits.

Excluded from Pay Strategy limits

4.24 The following costs are all outwith the respective Pay Strategy paybill limit.

• Progression.
• 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.

4.25 Please refer to paragraphs 4.26 and 4.27 for costs that are outwith the pay remit.

Costs to be excluded from the pay remit

4.26 Any changes to the baseline paybill such as mandatory increases to the employer's pension and/or National Insurance contributions; increases related to ensuring the financial health of the pension fund; 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.

4.27 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.

Modern Apprentices and Interns

4.28 The Pay Strategy 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 either of the following roles.

• 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. The public body would be required to pay the Modern Apprentice the established rate for the job on completion of the agreed training period.

4.29 The Pay Strategy 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 4.28 for Modern Apprentices. The expectation is that employers should pay at least the real Living Wage rate, or where the intern is undertaking a job equivalent to other staff within the organisation, the minimum equivalent salary point.

Part-time employees

4.30 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/or job weight the same proportionate increase, ensuring equal pay for like work or work of equal value.

4.31 However, the Pay Strategy 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.

4.32 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 with other employees with the same length of time in post but who worked full-time. There is also a risk that to pay all staff the same increase regardless of hours worked could undermine working relations between employees.

Progression

4.33 Nothing in the Pay Strategy 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.

4.34 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 4.11). Decisions taken to pay progression should be based on business needs, maintaining headcount and affordability.

4.35 It remains a matter for individual public bodies and their trade unions and 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 Pay Strategy 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 Strategy encourages public bodies to continue working towards ensuring maximum journey times are no more than 5 years. Where there are affordability pressures, the public body must contact their sponsor division and Finance Business Partner at the earliest opportunity and where appropriate include the Public Sector Pay team.

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

4.37 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.

4.38 The cost of paying progression under existing arrangements continues to be costed outwith the Pay Strategy limits (see paragraph 4.24) 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 overall paybill metrics.

4.39 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 into 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 4.40 to 4.44.

Addressing inequalities

4.40 Public bodies will still be able to use paybill savings to help fund their pay proposals to address evidenced inequalities (see paragraphs 3.11 to 3.25). This is 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.
• Additional non-consolidated increases to help reduce the impact of inflation on take-home pay.

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

4.42 Examples of the types of proposals that public bodies might submit to address inequalities include the following.

• Reducing any gender pay gap and/or the overall pay gap between the highest and lowest earners.
• Applying "smoothing" increases to reduce the impact of the stepped increases on existing pay and grading structures.
• Making minor changes to existing pay and grading structures, including the following.
  • Reducing progression journey times (removing minima and/or recalibrating pay steps).
  • Recalibrating existing pay steps.
  • Reducing and/or removing overlaps between grades.

See paragraphs 4.51 and 4.52 for further detail.

• Applying higher increases to work towards standardising rates of pay (pay coherence see paragraph 3.31),
• Standardising to a 35 hour working week (see paragraphs 4.45 to 4.50 for further detail).
• Equalising contractual and working hours.
• Removing / changing out-dated allowances.
• Changes to wider HR policies, including the following.
  • 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.

4.43 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 should be within the limits set out in the 2023-24 Pay Strategy and 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.

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

• The cost is included within the paybill limit.
• The proposals can be evidenced to show a tangible improvement (such as reducing the overall income gap and/or 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 their Sponsor team and the Public Sector Pay team (where applicable) to discuss options and set out the risks of not addressing the identified equality issues.
• 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.

Reducing the working week

4.45 The 2023-24 Public Sector Pay Strategy strongly encourages 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 as part of the 4 Day Working Week public sector pilot. 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.

4.46 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.

4.47 It is the Sponsor team and Finance Business Partner's role to consider the affordability and impact of any proposals to standardise to 35 hours. It is the Public Sector Pay team's role to ensure that all pay proposals, including standardising to 35 hours, are in line with the Pay Strategy. The Public Sector Pay team will provide advice to support the Sponsor team in helping their public body to draft 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.

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

Framework for the business case to reduce working hours

4.49 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 the public body will 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 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 a shorter working week will look like and how it will 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, impacts on overtime rates and arrangements etc.).
• Financial Impact.
  • The policy assumption is that there is no additional funding.
  • Impact on existing staffing numbers. The Pay Strategy 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 changes 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 a 35 hour week will look like. For example, 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 etc.?
  • Impact on the Right to Disconnect.
• Systems impact.
  • For example, any changes required to existing IT systems.
• Contractual implications.
• 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.

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

Amending or restructuring a pay and reward system

4.51 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 expectation 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 Strategy. Public bodies should ensure any job evaluation scheme they use enables them to fully utilise this data.
• 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.

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

Aligning or submitting joint pay proposals

4.53 The 2023-24 Pay Strategy continues to encourage smaller^[9] 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.

4.54 Thereafter, a brief review of the alignment arrangements should be carried out regularly to ensure it remains fit for purpose and continues to allow the body to recruit, retain and motivate its staff.

4.55 Public bodies considering putting forward a case to align to another public body's pay system should speak to their Sponsor team and the Public Sector Pay team in the first instance.

4.56 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 their Sponsor teams and the Public Sector Pay team. Public bodies seeking to align in this way should consider the pay coherence guidance at paragraph 3.31.

Legally committed pay award elements

4.57 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 Strategy, 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.
• The timeframe for its resolution.

4.58 Public bodies should note the basis of approval of pay remits in paragraphs 4.105 to 4.107 and ensure they do not create any new contractual obligations.

Staff pay remit approvals process

Pay remit process for 2023-24

4.59 All public bodies are required to complete an assessment pro forma in which they provide the following.

• 2022-23 outturn information.
• 2023-24 baseline position.
• Indicative costs for applying the basic pay increases, progression and where relevant, proposals to address inequalities – see paragraphs 3.11 to 3.16.
• Forecast paybill savings and the likelihood of being able to deliver these savings.

4.60 Public bodies should also provide a supporting business case which has a brief outline of their pay proposals and details of any changes proposed to existing pay and grading structures or terms and conditions to address pay inequalities.

4.61 Pay proposals are assessed by using a risk-based approach. Assessments are carried out on 2022-23 outturn and the 2023-24 pay remit proposals, which will determine whether proposals are signed off by Senior Officials or Remuneration Group.

4.62 The Sponsor team, Finance Business Partner and the Public Sector Pay 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 team will provide guidance on the proposals, ensure the proposals remain in line with the Pay Strategy and advise on the approvals process which will enable public bodies to engage in formal pay negotiations with their staff representatives/trade unions.

4.63 The public body is required to submit settlement information to their Sponsor team and the Public Sector Pay team within one month of the implementation of a pay award.

4.64 The Scottish Government's pay proposals require to be approved by Scottish Ministers. Analogue bodies' will be required to discuss affordability of applying the Scottish Government's pay offer with their Sponsor team and Finance Business partner before implementing. It is the responsibility of the Sponsor team to ensure the Public Sector Pay team is included in all relevant correspondence.

4.65 The following table summarises how the outturn and pay proposals inform the pay remit approvals process.

2022-23 outturn and 2023-24 remit proposals	Decision maker
The outturn is in line with the approved remit (see paragraph 4.69) and the cost of the current pay proposals are assessed as low risk (see paragraph 4.72).	Senior Officials within the sponsor area[10]
The outturn breached approved remit (see paragraph 4.69) and/or the current pay proposals are assessed as medium risk (see paragraph 4.72).	Remuneration Group (if there are established precedents, Remuneration Group may agree that Senior Officials can decide)
The 2022-23 outturn breached approved remit (see paragraph 4.69) and/or the pay proposals are assessed as high risk (see paragraph 4.72).	Ministers

4.66 Any proposals which are assessed as unaffordable or exceed the ceiling metric of 5 per cent paybill increase are unable to be put forward for approval.

4.67 The process underpins the Pay Strategy 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. Public bodies and their trade unions are expected to have constructive and collaborative pay scoping discussions prior to the public body submitting their outline proposals.

Outturn rating

4.68 The previous year's outturn information is required to be provided as part of the current year's pay proposals. As noted in paragraphs 2.9 to 2.11, it is the responsibility of the Chief Executive or Accountable 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.

4.69 The Public Sector Pay team will rate the outturn for the previous year as follows.

Outturn Rating	Criteria
In line with the approved remit	The outturn will be rated as in line with the approved remit if all of the following apply. The settlement information for previous year 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.
Breached the approved remit	The outturn will be rated as breaching the approved remit if any of the following apply. The implemented pay award differed from the basis of the approved remit. 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. 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. The public body did not comply with any conditions placed on approval. The public body did not follow the approvals process for the previous year.

4.70 If the outturn breached the approved remit, the public body must provide an explanation as to why and the current remit and outturn must be considered by the Remuneration Group.

4.71 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 4.108 to 4.113.

Pay remit rating

4.72 The current year's remit is assessed by the Public Sector Pay team, in conjunction with Sponsor team colleagues. The Public Sector Pay team assign the final pay remit rating. The table below summarises what criteria underpin each rating.

Risk rating	Criteria
Low Risk	The pay remit will be assessed as low risk and can be approved by Senior Officialsif all of the following apply. The previous year's outturn is in line with the approved remit. The current proposals are within the metrics of the Pay Strategy framework and are not considered contentious or to be setting a precedent. Projected paybill costs and staffing numbers are consistent with the budget allocations. Proposals are demonstrably affordable and sustainable.
Medium Risk	The pay remit will be assessed as medium risk and will likely require to be considered by the Remuneration Group if any of the following apply. The previous year's outturn breached the approved remit. The current proposals do not align with the objectives of the Pay Strategy. Proposals might be considered as contentious or could set a precedent across the wider public bodies covered by Public Sector Pay Strategy. Additionally, the following must all apply: Projected paybill costs and staffing numbers are consistent with the budget allocations and are within the overall ceiling paybill metric of 5%. Proposals are demonstrably affordable and sustainable including any proposed savings and commitment to public service reform, particularly those including changes in staffing or terms and conditions.
High Risk	Proposals are outwith Pay Strategy limits and cannot be approved by officials or the Remuneration Group.

Approval of pay remit proposals

4.73 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.

Low risk process

4.74 Where a public body has been assessed as low risk then their proposals are able to be approved by Senior Officials within the relevant sponsor area.

4.75 Depending on whether the public body is a NDPB, Public Corporation, Agency or associated department, the following Senior Officials can approve:

Public body	Portfolio approval
NDPB or Public Corporation	Director of the relevant Sponsor Directorate[11]
Agency	Director General[12] of the relevant Sponsor Directorate
Associated department	Permanent Secretary

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

4.77 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 the Remuneration Group.

4.78 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 their Sponsor team and the Public Sector Pay team before concluding pay negotiations (see paragraphs 4.107 to 4.108).

4.79 The public body is required to submit a settlement proforma within one month of the pay award being implemented (see paragraphs 4.109 to 4.110).

Medium risk process

4.80 Where a public body has been assessed as medium risk then their pay proposals will likely require to be approved by the Scottish Government's Remuneration Group.

Remuneration Group

4.81 All proposals that require Remuneration Group consideration need to have the support of the relevant portfolio Senior Official as detailed at paragraph 4.75.

4.82 It is the responsibility of the relevant Senior Official in the sponsor directorate to put the submission to the Remuneration Group to consider the proposals. The submission should include the advice from the Public Sector Pay team and the Finance Business Partner. On the basis of this information, the Remuneration Group will decide whether to approve the proposals, to seek further information or, where they consider the proposals as novel or having the potential of a wider read-across to other public bodies, to refer them to Ministers.

4.83 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. Examples of proposals that may be referred to Ministers include the following.

• Those where the outturn breached the approved remit and the Remuneration Group consider the supporting explanation to be inadequate.
• Where the current remit is novel or contentious
• Where the remit is of particular interest to Ministers.
• The pay remit proposals for the Scottish Government Main bargaining unit require to be approved by Ministers regardless of its assessment risk rating.

4.84 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 their Sponsor team and the Public Sector Pay team before concluding pay negotiations (see paragraphs 4.107 to 4.108).

4.85 All public bodies are required to submit a settlement proforma within one month of the pay award being implemented (see paragraphs 4.109 to 4.110).

High Risk process

4.86 If the current remit proposals are not considered to be within the Pay Strategy limits and rated as High Risk, the public body will be asked to revise its proposals to bring them in line with Public Sector Pay Strategy. If proposals remain outwith Pay Strategy limits, they will be required to be submitted to Ministers for their consideration, including the views of the Remuneration Group.

Approval times

4.87 The aim will be to approve proposals which are assessed as low risk within four weeks.

• This provides for up to two weeks for assessing the outturn and remit proposals and resolving queries with the Sponsor team, Public Sector Pay team and Finance Business Partner as appropriate. 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 you will be advised 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.

4.88 Please note that if the proposals are rated as medium or high risk and are referred to the Remuneration Group, this may take longer than four weeks. It could take up to a further three weeks for the formal approval of proposals. This allows time for the Sponsor team to prepare the formal submission and submit it to the Remuneration Group for approval. See paragraphs 2.16 to 2.18 and 4.91.

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

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

4.91 All final, cleared 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 team. Failure to meet this deadline will result in delays to the proposals being considered. Further information is provided in paragraphs 9.8 to 9.9 on what is expected to be considered and timescales for preparing a submission. If the deadlines set out at paragraph 9.9 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.

Notification of approval outcome

4.92 Once the pay proposals have been approved the Sponsor team will notify 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.

Analogue or aligned to another public body

4.93 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 their Sponsor team (where relevant) will also discuss with the Public Sector Pay team.

4.94 Public bodies which align or analogue to another public body are expected to submit a completed settlement proforma within one month of implementing 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.

Approvals process for reduced working hours

4.95 Public bodies should submit their business case to their Sponsor team and the Public Sector Pay team at the same time as their pay remit proposals. The business case should include details of engagement with trade unions or staff representatives.

4.96 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.

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

4.98 Where it is agreed that the proposals are within the Pay Strategy 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 Strategy, Senior Officials will refer them to the Scottish Government's Remuneration Group for approval.

4.99 The Public Sector Pay team will provide regular updates to Remuneration Group on all aspects of implementing Pay Strategy, including changes to reduce the working week.

4.100 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.

Staff pay discussions and negotiations

Public body engagement with trade unions

4.101 The Pay Strategy encourages all public bodies to have constructive and collaborative pay discussions with their relevant trade unions on the development of their overall pay and reward strategies, prior to submitting their assessment proforma and/or their remit for formal approval.

4.102 However, while informal discussions can take place, public bodies must not enter into formal negotiations with their trade unions 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.

4.103 The approved pay remit sets out the public body's maximum negotiating position within the Pay Strategy limits, taking account of affordability, and this will set the parameters for detailed negotiations with their recognised trade unions.

4.104 If during pay discussions or negotiations any points arise regarding the application of the Pay Strategy, public bodies and/or their trade unions are encouraged to speak with their Sponsor team and then the Public Sector Pay team to seek clarification.

Legal commitments

4.105 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).

4.106 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.

Changes to approved remits during negotiations

4.107 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 their Sponsor team and the Public Sector Pay team. Advice will be provided to determine 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 their Sponsor team and/or the Public Sector Pay team consider them novel or contentious.

4.108 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 their Sponsor team and the Public Sector Pay team to discuss. The teams will be able to advise if the changes require formal approval from the Scottish Government. Failure to notify the Scottish Government will result in the public body's outturn breaching the approved remit and may result in further action as set out in paragraphs 4.111 to 4.113.

Staff pay settlements

Information required once pay award implemented

4.109 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 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 Medium risk.

4.110 Public bodies should contact their Sponsor team if they require assistance in providing any of the required information. Public Sector Pay team will provide advice to Sponsor teams as required.

Exceeding a pay remit

4.111 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.

4.112 There may be unforeseen circumstances that occur after 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 their Sponsor team and the Public Sector Pay team at the earliest opportunity. The Public Sector Pay team will advise if the changes require to be considered by the Remuneration Group.

4.113 If the 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 capping future pay remits or a governance review of the body.