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

Key findings

The findings indicate that within the public sector there are higher proportions of women and older employees than within the private sector. Any action that protects employment will protect these groups.

In terms of our specific proposals, the continued commitment to support the payment of at least the real Living Wage will directly benefit younger employees. Furthermore, the analysis indicates there are higher proportions of women, those with a disability, from a minority ethnic background and younger employees earning under the lower pay threshold based on a full-time equivalent salary of £25,000. Therefore the proposed measures for lower earners will continue to protect these individuals and in many cases provide a positive benefit.

The policy may also help in working towards reducing the gender pay gap within the public sector as it should increase the overall base levels of pay for lower earners where traditionally women are overly concentrated. This is further supported by the continued restraint applied to higher earners including senior appointments, where there are higher proportions of men.

The targeted low pay increases proposed will help erode overall income inequality and positively impact on all public sector staff directly covered by this policy including those with a protected characteristic. In particular providing a cash underpin for those earning under a full-time equivalent salary of £25,000 will directly benefit just under 25 per cent of lower paid public sector employees, many of whom will have one or more protected characteristic. The pay policy will provide employers with the scope to propose higher increases, of up to £800, for staff who are currently on a base salary that is just over the proposed lower pay threshold of £25,000 to address any possible "leapfrogging" and to maintain the integrity of their current pay systems.

Furthermore the policy will continue to allow employers the flexibility to use paybill savings to address locally identified pay or grading inequalities including pay coherence.

From the information provided for the wider public sector, there is nothing to suggest that setting a cash underpin for those earning under a full-time equivalent salary of £25,000 will result in any staff being adversely affected, and in fact it will benefit nearly a third of public sector employees, many of whom will have one or more protected characteristic.

Furthermore, around 40 per cent of public sector employees earn a full-time equivalent salary of between £25,000 and £40,000, and the analysis indicates that any higher increases for this group will help towards pay restoration.

The pay policy allows some flexibility for employers, within an overall framework, to take their own decisions for pay and reward to take account of their own business needs, workforce issues and affordability whilst ensuring they meet their equality duties.

In addition to the set basic pay increases and to recognise issues identified by stakeholders, it is proposed that the pay policy will continue to provide employers with the flexibility subject to affordability to address evidenced workforce or structural pressures that create or maintain pay inequalities. It is proposed, reflecting the cash underpin is an intrinsic element of the policy and to provide fairness across public bodies, that the total amount of paybill savings to address pay inequalities be retained at 0.5 per cent for 2021-22.

However in recognition of the difficulties arising from responding to the pandemic, which meant that it was not possible for some public bodies and trade unions to conduct their usual pay negotiations in 2020-21, employers may carry forward any unused flexibility to be added to the 2021-22 provision. Furthermore for 2021-22, the scope of identified pay inequalities is extended to enable employers to use the flexibilities to deliver greater pay coherence. The Finance Pay Policy team will continue to encourage the use of the flexibilities in those public bodies identified as having the greatest risk of potential inequalities.

While the policy actively targets the lowest earners it does not prevent employers using paybill flexibilities to apply higher increases to address identified and evidenced inequalities. Therefore it is possible for employers across the public sector to vary the level of basic pay award beyond the guaranteed increases applied to different staff groups, different jobs, or grade structures to reflect their own priorities based on locally gathered evidence and assessment.

The policy continues to allow for individual employers to take decisions on the payment of progression. The cost of paying progression is outwith the limits set for basic pay increases. It is a matter for each public body to equality proof their own progression and pay arrangements taking into account affordability and performance. Therefore there is no direct discrimination as a consequence of the policy approach to progression.

Nor is there evidence to suggest that the continuation of suspending non-consolidated performance payments will adversely impact on individuals with a protected characteristic.

There is no evidence to suggest that the cap on increases for higher earners would adversely impact the take-up of Board Appointments among those with a protected characteristic as the level of daily fee rate may not be the key driver for taking up an appointment but rather to provide the opportunity to represent and raise awareness. The pay policy for Senior Appointments makes it explicit that the main objective of remunerating Board Members is to increase diversity but is not intended to meet in full the market rate that the individual may otherwise expect or command.

Nevertheless it remains the case that women are significantly under-represented among senior appointments and, although one of the key strategic aims of the pay policy is to continue to work towards making sure that pay is fair and non-discriminatory, the pay policy only focuses on levels of remuneration and not wider HR policies. The supporting Technical Guide will remind employers of their duty in this respect.

A fifth of employees covered by the pay policy work part-time and three out of every four of them is a woman. Part-time workers are more likely to be among the lower paid employees. Around one in five of those staff who work part-time have a full-time equivalent salary of more than £25,000 but, although their take-home pay is below a full-time equivalent salary of £25,000, they will not be eligible for the guaranteed cash underpin. However it is noted that their take-home hourly rate will be higher than the equivalent for a full-time employee on the same take-home pay. Although we do not have the information, it is likely that some of those working part-time are older employees and may do so to cover care duties. There may also be some who choose to reduce their hours for phased retirement or to pursue other life choices. We do not have information on full-time equivalent salaries or individual working patterns to determine the extent of any potential detriment. However the proposed approach to provide a guaranteed basic award for such employees reduces the impact.

The introduction of the discretion for employers to work towards standardising to a 35 hour working week can be seen to provide a benefit to all impacted employees. It is possible there could be a greater benefit for part-time employees, particularly for the many who are lower paid and as such more likely to be a woman, a disabled person, an individual from a minority ethnic group, a younger employee or a combination of one or more of these protected characteristics.

The continuation of the commitment to a No Compulsory Redundancy policy provides job protection for all employees covered by the pay policy. There is no evidence to suggest that this creates any negative direct or indirect discrimination.

It is recognised that, while we do have gaps in the information provided by public bodies directly subject to the pay policy on some of the protected characteristics, we are satisfied from the analyses undertaken there is no unlawful discrimination in the pay policy proposals. The proposed progressive approach for 2021-22 is targeted to benefit lower paid staff recognising that there is a higher proportion of staff in this group who have one or more protected characteristic.

Due to the higher proportion of women, disabled people, those from a minority ethnic group and younger employees among lower paid public sector workers, these individuals are more likely to benefit from the progressive pay measures. The cap on paybill increases for those earning above a full-time equivalent salary of £80,000 and the cap on pay progression (for those subject to the senior appointments pay policy) will not impact any protected group unduly. Any risk of individuals being adversely affected by the cap on progression (for those subject to senior appointments pay policy) and the reduced increases for those earning above a full-time equivalent salary of £80,000 is mitigated by the aim of the policy to work to reduce the gender pay gap and overall pay inequality. Furthermore, due to restricted budgets, there is a need to continue to set capped pay increases to ensure they are affordable and sustainable, along with maintaining the No Compulsory Redundancy policy which helps to protect public sector jobs.

The impact of the pay policy will continue to be monitored through the annual pay remit process by the levels of pay awards proposed and implemented. It is for individual public bodies to submit pay proposals that are affordable and within the framework set by the pay policy taking into account their own local pay issues and ensuring that they do not create new or perpetuate pay inequalities. As part of that process we will also continue to collect key statistics which will enable us to undertake analyses of the impact of future pay policy on equality.