Pay pressure

Pay_accountability_Stock_000014672429Small_120x90Provisions on pay accountability are among the most headline-grabbing reforms in the Localism Act. Judith Barnes and Huw Jones set out what is involved.

Starting early next year, relevant local authorities in England and Wales will have new duties to set out their policies towards a range of issues relating to the pay of their workforce, particularly their most senior and lowest paid employees.

The Localism Act 2011 requires relevant authorities (including county, district and borough councils and fire and rescue authorities) to prepare an annual pay policy statement setting out their policies for the financial year relating to: the remuneration of their chief officers; the remuneration of their lowest-paid employees; and the relationship between the pay of chief officers and that of other employees.

Local Government Minister Bob Neill has said that the Localism Act opens up council pay rules so that salaries for senior posts get “democracy proofed”. The relevant provisions in the Act will come into force in England two months after the date when the Act was passed (ie, 15 January 2012). An order made by the Welsh ministers would be necessary to bring the relevant provisions into force in Wales.

What it must cover

The statement must cover the authority’s policies relating to:

  • the level and elements of remuneration for each chief officer (including salary, bonuses and benefits in kind);
  • remuneration of chief officers on recruitment;
  • increases and additions to remuneration for each chief officer;
  • the use of performance-related pay for chief officers;
  • the use of bonuses for chief officers;
  • the approach to the payment of chief officers on their ceasing to hold office under or to be employed by the authority; and
  • the publication of and access to information relating to remuneration of chief officers.

Chief officer is defined to include chief and deputy chief officers as defined in section 2 of the Local Government and Housing Act 1989 (some of whom may not be on chief officer terms and conditions of service).

Before it takes effect, the pay policy statement has to be approved by a resolution of the authority. This must be done, for the first statement, no later than 31 March 2012. Following approval, the statement must be published as soon as possible on the authority’s website (and in any other manner the authority thinks fit). An authority may amend its pay policy statement and this also requires a resolution.

Functions

The Act specifies that the functions relating to pay accountability are not executive functions and also that section 101 of the Local Government Act 1972, which gives local authorities powers to arrange for the discharge of their functions by committees, officers or other local authorities, does not apply to these functions. This means that the resolutions must be by full council and policies may need to be flexible.

In complying with their duties in respect of pay accountability, relevant authorities in England must have regard to any guidance issued or approved by the Secretary of State. Relevant authorities in Wales must have regard to any guidance issued or approved by the Welsh ministers.

The Department for Communities and Local Government (DCLG) will be publishing guidance to help English authorities understand and comply with their new duties. Draft guidance has already been published on which comments can be submitted until Friday 16 December 2011: Openness and accountability in local pay: Draft guidance under section 40 of the Localism Act (17 November 2011). At the time of writing Welsh ministers have not yet published any guidance for Welsh authorities.

Increased obligations

The provisions add to the range of transparency obligations already placed upon local authorities. The Accounts and Audit Regulations already require historic expenditure on chief officers within specified pay bands to be disclosed in the accounts. Civil servant pay also has to be disclosed along with duties and responsibilities of senior post holders (with a salary of more than £58,000 per annum). Similarly, historic local expenditure over £500 to third parties should be disclosed and most authorities now publish this monthly on their website.

Authorities also need to gear up to deliver greater transparency in advance of publishing new contracts and tenders. See the papers produced by the Local Government Group in collaboration with the Local Public Data Panel. Local authorities also have the Code of Recommended Practice for Local Authorities on Data Transparency, which was issued by the Secretary of State in exercise of powers under the Local Government, Planning and Land Act 1980.

Judith Barnes and Huw Jones are partners at Eversheds LLP. Judith can be contacted on 0845 498 4059 or by email at This email address is being protected from spambots. You need JavaScript enabled to view it.. Huw can be contacted on 0845 498 7483 or by email at This email address is being protected from spambots. You need JavaScript enabled to view it..