Public sector pay policy 2021 to 2022: equality impact assessment (revised)

Scope of the Equalities Impact Assessment

Pay forms a large part of public sector expenditure and accounts for up to 60 per cent of annual revenue across the public sector in Scotland; the total paybill for public bodies covered directly by the pay policy is around £2.0 billion and the policy applies to nearly 42,000 full-time equivalent employees. Due to continued public spending cuts, budgets remain under severe pressure and this has been compounded by the recent increases in employer's pension and National Insurance contributions.

The population for Scotland as at 30 June 2020 was 5.5 million (2019 mid-year population estimate) of which 3.5 million (64 per cent) are of working age. Of those working just over
1 in 5 (21 per cent) are employed in the public sector. The 2021-22 Public Sector Pay Policy directly impacts around 50,000 employees (around 42,000 full-time equivalent). As the pay policy acts as a reference point for all devolved public sector pay groups, it indirectly affects around 465,000^[6] employees, and is key in setting the context for these pay negotiations.

While over half^[7] of all Scottish employees earn under £25,000 there is a significant difference between private and public sector workers with the majority being in the private sector. The proportion in the public sector earning below £25,000 is around a third compared with more than half in the private sector. The lower proportion in the public sector can partly be attributed to the positive action taken in the pay policy in recent years of targeting higher increases for the lowest earners.

Overall nearly four-fifths of Scottish employees earn below a full-time equivalent salary of £40,000. There are a higher proportion of private sector employees earning below the £40,000 threshold (81 per cent compared with 69 per cent in the public sector). This in part will be accounted for by the maximum of the main grade teacher scale being above this threshold and the majority of teachers being on the maximum. Almost half of employees covered by the pay policy have a full-time equivalent salary of between £25,000 and £40,000, compared with nearly 40 per cent across the public sector as a whole and almost double the proportion in the private sector.

It is estimated around 3 per cent of the private sector and around 2 per cent of the public sector earn more than £80,000. The estimated proportion of those directly covered by the pay policy is lower, at less than 0.5 per cent. This lower proportion is due to the Senior Civil Service cohort being reserved and therefore subject to UK Government pay policy.

It is noted that a higher proportion of part-time employees are among the lower paid staff and they are more likely to be women. While over 30 per cent of all public sector employees work part-time nearly 90 per cent are women. However the proportion of employees working part-time in public bodies directly covered by the pay policy is lower than the wider public sector. Around 20 per cent of employees work part-time and of those part-time employees around three-quarters are women. As there is a higher proportion of female part-time employees with a full-time equivalent salary of £25,000 or below this means women are more likely to have a lower take-home pay.

In developing the 2021-22 pay policy the Finance Pay Policy team consulted stakeholders on the 2020-21 pay policy and processes. The application of the pay thresholds was raised, in particular that the lower increase was the main issue identified in terms of equality. In addition some employers considered the current approach on No Compulsory Redundancies was a barrier to making reforms and savings that could be used to address inequalities.

The findings from this Equalities Impact Assessment support Ministerial decisions taken on the 2021-22 pay policy. In developing the 2021-22 pay policy, consideration is required to be given to affordability for the public purse and the public's expectations on public spending against protecting the lowest earners and pay restoration. To achieve this, a number of options were considered on the application of different levels of increases and the setting of different thresholds to optimise the benefits of the policy within the current tight financial constraints. Consideration was also given to balancing the need for fairness and consistency across all public sector workforces against the value to individual public bodies of the pay policy, providing sufficient flexibility to negotiate changes in working practices that will support the delivery of high quality public services and increase productivity.

In relation to the three needs of the equality duty, public sector pay policy has due regard to the need to:

(1) Eliminate discrimination, harassment, victimisation and any other conduct that is prohibited by or under the Act^[8]

The key strategic aims of public sector pay policy are:

• To invest in our public sector workforce which delivers top class public services for all, supports employment and the economy, while providing for sustainable public finances.
• To provide a distinctive and 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 and recognise recruitment and retention concerns.

(2) Advance equality of opportunity between persons who share a relevant protected characteristic and persons who do not share it

The measures proposed in the pay policy can be seen to continue to protect all lower paid workers from the worst effects of the years of pay restraint and help reduce the impact of the consequential pay erosion. As there is a higher representation of women, disabled people, those from a minority ethnic group and those from the younger age group among the lower earners, the approach taken in the pay policy will help provide such individuals with a positive benefit as well as work towards reducing the gender pay gap and overall income inequality.

The policy sets the overarching framework for delivering Ministers' key priorities on pay. It is for public bodies to make individual choices on the impact of the policy on their own circumstances taking into account affordability, their own staffing profile and equality issues. Although the policy does provide a positive benefit for some individuals, on the basis that, for example, they are more highly represented among the lower paid, the policy framework is applied on the same basis to all staff regardless of gender, age, disability, ethnicity etc.

(3) Foster good relations between persons who share a relevant protected characteristic and persons who do not share it

While the policy provides the framework it is for public bodies to make individual choices on the impact of the policy on their own circumstance taking into account their own staffing profile and equality issues.

All employers are required to confirm they have considered their obligations under equalities legislation in developing their pay proposals. Furthermore, as part of the pay remit process public bodies are required to provide equality focussed information. This enables the Finance Pay Policy team to analyse the impact of the pay policy on individuals by gender, age, work pattern, disability and ethnicity. Gathering and analysing this information centrally, and sharing the results will aid other employers in developing their own pay proposals.