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

Recommendations and conclusion

Pay forms a large part of public sector expenditure in Scotland. As a result of continued public spending cuts, budgets remain under severe pressure and this is compounded by the increases in employer's pension and National Insurance contributions. The primary aims of the Scottish Government's Public Sector Pay Policy are to set pay increases in a way that are fair, reflect the real life circumstances people face, help sustain public sector jobs and protect public services, while ensuring public sector budgets remain in balance and that pay rises are affordable now and in the future.

The aims of the pay policy also recognise that the impact of COVID-19 has not been felt equally. It is expected the on-going economic impact will be felt disproportionally by women as well as those from minority ethnic communities, disabled people and young people, and this could result in increasing unemployment and pay gaps in the short to medium term.

The pay policy is intended to help protect jobs. The cash underpin for those earning a full-time equivalent salary of £25,000 or less and the higher increase for staff earning between £25,000 and £40,000 will help reverse the impact of pay restraint on the real incomes of those staff subject to the public sector pay policy. The above inflation basic award for those earning between full-time equivalent salaries of £40,000 and £80,000 will also continue to benefit employees, some of whom will have faced the greatest detriment as a result of increases to employees National Insurance and pension contributions.

The Scottish Government's commitment for staff under its direct control to supporting payment of the real Living Wage, and the cash underpin for those earning a full-time equivalent salary of £25,000 or less, directly benefits those on the lowest incomes and will continue to provide protection to low earners, in particular those individuals with a protected characteristic.

In addition, the introduction of the £40,000 threshold provides the opportunity for awarding a higher increase for those earning between £25,000 and £40,000, determined by overall affordability constraints, to help ensure the majority of public sector employees receive an above inflation award helping towards pay restoration without introducing any detriment for those with a protected characteristic.

It is concluded from our assessment the measures proposed in the 2021-22 pay policy can be seen to positively benefit lower paid staff. From the data available there is a higher proportion of women, disabled people, individuals from a minority ethnic group, younger employees or a combination of one or more of these protected characteristics as well as part-time workers among lower paid employees. Therefore the measures proposed in the pay policy protect these employees from pay restraint and in many cases provide a positive benefit - underpinning Ministerial objectives for a wealthier and fairer Scotland as well as helping reduce the impact of COVID-19 on these individuals.

The progressive approach proposed for the pay policy will also help to reduce overall income inequality. It may also help in positively working towards reducing the gender pay gap within the public sector as it should increase the overall base levels of pay for those at the lower end where historically 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.

While we are satisfied the risk of any indirect discrimination, as a result of capping the pay for higher earners, can be justified by the overarching aims of the pay policy to ensure fairness by working to reducing poverty, it will still be necessary for individual employers to ensure they do not introduce or perpetuate any direct or indirect discrimination for individuals in their application of the policy. Employers covered by this pay policy are also subject to the equality duties and are expected to undertake their own assessment of their pay proposals prior to submitting them to the Scottish Government.

To help employers work towards delivering the policy aim that pay is fair and non-discriminatory, the public sector pay policy continues to provide public bodies with the flexibility to use paybill savings to address evidenced equality issues.

The pay policy will set the overarching framework within which public bodies can make individual choices on the impact of the policy on their own circumstances. Public bodies have the flexibility to draw up their own pay proposals to take into account local pay issues such as recruitment and retention, equality and the impact of the lower pay measures on other staff. The pay policy actively encourages employers to take into account their own staffing profile, local evidence, views of staff and unions and equality issues in framing their pay proposals.

The introduction of the discretion for employers to consider working 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.

Continuation of the commitment to the 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.

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.

The supporting Technical Guide to the pay policy will continue to remind public bodies of their duty to ensure their pay systems are fair and non-discriminatory and that they have due regard to its obligations under public sector equalities duties in considering their pay proposals.

The Scottish Government

March 2021