Senior Management Pay Review
The Advisor to Human Resources presented a report to the Committee following a referral from the Council meeting on 16 April 2014, where it was resolved Employment Committee would revisit the senior officer’s salaries in the new municipal year and make recommendations on changes as it saw fit, including reducing senior officers’ pay.
The key points highlighted by the Advisor to Human Resources from the report and in response to questions included:
· The HAY Group had assisted the Council in reviewing the senior manager pay scales. The HAY Group were highly respected and had undertaken a second, independent review of the proposal. They were not considered to be biased in any way.
· In his view, the previous decision of the Employment Committee was a reasonable one.
· The group data taken into account during the review included only the public sector. If the private sector had been included, this would have distorted the results up 20%.
· The Committee had decided to approach the pay scale banding using a median level. A 10% differential had also been accepted to establish the width of the salary bands.
· The use of market supplements was in line with Council policy. Independent data had been sought and was considered relevant and accurate. Market supplements would be reassessed after a two year period. One year of this had already gone by.
· The legal implications of making any changes to senior management salary were considerable. If, following a reduction in pay, the matter was taken to an employment tribunal to evaluate the fairness of the action, the Council could face a cost payment and compensation payment of up to £76,000.
· A reduction of 5% across all the positions considered in the review would result in a £44,000 saving. Rehiring for one position would cost approximately £20,000. It was considered that rehiring would not be easy, particularly if the Council was negatively perceived as an employer.
· It was also considered that a reduction in senior management salary would call into question the morality, motivation and reputation of the Council as an employer, and could see a withdrawal of good will.
· Senior management salaries had been frozen for a significant length of time. The Chief Executive’s last pay review was in 2004.
· If the group data used had included only local authority data, and not that of ‘not for profit’ organisations, the resulting numbers would be decreased by 6%. However, as a median level was used within the pay scale banding the subsequent change would be minimal.
· Voluntary reductions in salary could be requested. These were usually, in the Advisor to Human Resources’ experience, temporary and for short periods of time.
· The pay review had secured quality, experienced people for the roles in question.
· Information on the gap between the highest and lowest paid in the Council would be circulated to the Committee members.
The Committee discussed the report and a member of the Committee noted that, if the Chief Executive had received a pay increase of 2% each year for the past ten years, and this year had her salary reduced by 5%, she would still be receiving a higher salary than at current.
The Committee clarified that the review had reduced the number of senior management positions from thirteen to seven, had saved £700,000 in its first year and £1 million in its second year. It was stated that the restructure resulted in new jobs, not pay rises.
A member of the Committee stated that the restructure had not changed the number of Directors within the Council and that the number of managers with the word ‘Director’ in their job title had remained the same. It was requested that the Chief Executive be asked to join the meeting to clarify this point. A member of the Committee further stated that individuals appointed as a result of the restructure had their pay increased, in some cases, up to 33% (including market supplement).
A motion was proposed and seconded to publish, in the public domain, the exempt minutes of the Employment Committee meeting held on 3 February 2014. This motion was carried.
RESOLVED that the exempt minutes of the Employment Committee meeting held on 3 February 2014 be published in the public domain.
A member of the Committee noted that at the meeting of Employment Committee held on 3 February the Committee had resolved unanimously on the pay awards for four out of the six senior management positions considered. The pay awards for the remaining two positions considered were resolved five votes in favour and one vote against. Another member of the Committee commented that if objection had not been explicitly expressed, then it had been incorrectly interpreted as support.
The Committee discussed the money that had been saved through the restructure, the quality of the individuals that had been secured, and the extra responsibility placed on these individuals. It was noted that Councillors were appointed to the Employment Committee by Full Council to make decisions on relevant matters, including the senior management pay scale.
It was suggested by a Member of the Committee that, in light of the savings being required by the Council in the upcoming year and the unfavourable response to the review from the public, senior managers be asked to take a voluntary reduction in salary and that be at 15%.
The Advisor to Human Resources advised on the possible consequences of approaching senior managers with a voluntary reduction in pay. These would depend on the ensuing response of the Council and may send a message to senior managers that they were being targeted. A disturbance in the employee / employer relationship may make senior managers more vulnerable to head-hunters, particularly as the market place had become more buoyant.
The Interim Head of Legal and Governance further advised that such an approach may affect the implied term of mutual trust and confidence between employee and employer. The singling out of named individuals to be placed under that public pressure would be a breach of contract.
The member proposed that a reduction of 10% be suggested to those senior managers receiving a salary over £100,000. The proposal did not attract a seconder.
The Chairman welcomed the Chief Executive to the meeting. The Chief Executive declared a conflict of interest, as her salary was a subject of the senior management pay review. As such, she would only respond to questions of fact and this was confirmed by the Interim Head of Legal and Governance.
The Chief Executive explained that the first phase of the senior management restructure reduced four separate areas down to one. The second phase of the restructure would focus on Childrens’ and Adult Social Care. The executive director positions had been maintained and the hybrid director positions in Governance, Growth and Regeneration and Communities had been created. These positions were of a different nature. The Chief Executive subsequently left the meeting.
A member of the Committee expressed dissatisfaction that the Employment Committee did not appear to have the power to alter its previous decision.
A motion was proposed and seconded that it be recommended to Council that the decision of Employment Committee at its meeting on 3 February 2014 on senior officers’ salaries had been revisited and the review process and outcomes were found to be satisfactory, and that no changes be made to senior officers’ salaries. This motion was carried five voting in favour, one voting against and one abstaining from voting.
RESOLVED (five voted in favour, one voted against and one abstained from voting) that it be recommended to Council that:
i) The decision of Employment Committee at its meeting on 3 February 2014 on senior officers’ salaries had been revisited and the review process and outcomes were found to be satisfactory; and
ii) No changes be made to senior officers’ salaries.