Ensuring council pay structures can withstand public scrutiny

Unacceptably large pay rises for senior council staff, which became endemic during the first ten years of the 21st century, must not be allowed to return, says a report from the House of Commons Communities and Local Government Committee.

The Committee urges councils to ensure inflation-busting salary increases are not re-established as economic conditions improve, to research market information to make sure they are not paying over the odds, and to develop more robust appraisal systems to ensure top-paid council staff provide good value for money.

What is the background to this report?

The report arises from evidence that, in the first decade of this century, the rate of pay rises for senior council staff rose at significant levels – in excess of other pay rises in both the public and private sector. The matter is being brought into clear focus by a series of issues.

In times of increased austerity, the general economic downturn has given an enhanced profile to the post holder and the salary it attracts, particularly in the local community.

These sentiments have been given increased prominence in areas where high profile inquiries have been undertaken as a result of failures to protect vulnerable adults or children under the care of the local authority. This has resulted in clear direction being given from central government as to how levels of pay should be considered, and there is a willingness from local members to engage in the issue when levels of pay for senior officers fall to be considered. This gives a clear intention that they are seeking value for money for their electorate.

What are the key findings of the report?

The report seeks to provide a framework within which local members can appoint senior staff at a pay level which is meaningful and appropriate for the role. There is the gap between the private and public sector, which is historic for senior roles, as well as the local perception that chief officer's pay is well in excess of average local wages in the vicinity.

The report seeks to provide a framework which less reliant on national pay schemes – with a suggestion of a more blended solution with information being provided from regional employers to assist in setting the level of new salaries on a more objective basis. A well-intentioned approach. However, in light of the clear disparities with senior roles in the private sector, it is debatable whether it will really assist.

How should the balancing act between pay rises and the ability to recruit qualified staff be approached?

The real solution will be provided by the local authority:

• offering a clear assessment of role backed by advice from informed officers;
• blending comparative evidence from other authorities;
• applying a localised dimension.

The end result should arrive at a more bespoke approach that will bear scrutiny from either within or outside the council.

There is a discussion of the need for a chief executive and the use of a shared chief executive and the perceived savings of a shared role. What is clear is that the savings are viewed in a rather basic way, instead of having a more holistic view of the new structure and the increased responsibility that may pass further down the structure with attendant cost.

If a shared chief executive is the desired model, then the approach has to be wider. Consideration of the structures in both authorities will be required, together with a reasoned  examination of the pay levels at a senior level, to arrive at the real cost of such an innovative approach and to define the real saving rather than merely the cost of the chief executive.

What should lawyers advising in this area take note of?

A discussion of redundancy costs and restructuring contains the usual caveats of paying significant sums only to re-appoint either consultants at increased costs or for the redundee to take up a new post immediately.

The approach that is needed is to consider a redundancy policy as part of a suite of employment policies so that when recruitment decisions arise, there is a clear position for members to evaluate the consequence of their decisions.

In conclusion, the report considers a number of well-rehearsed issues in the context of chief officers. It offers guidance as to possible methods to approach the issue which attracts increasing levels of public scrutiny.

In reality, there is no substitute for those advising to adopt a reasoned and rational approach based on thorough evaluation of comparative data. This can then be presented to decision-makers to proceed with a decision as to levels of remuneration and the structural implications of their wider decisions.

If that has been considered, it will enable a robust decision to be made that will withstand public scrutiny.

Gareth Pinwell is a partner at Ashfords. He was interviewed by Nicola Laver.

If you would like more information about how LexisNexis supports lawyers in local government, please take a look at the Public Sector area of its company website. This article was originally published on 1st October 2014 in LexisLibrary. The views expressed by Lexis’ Legal Analysis interviewees are not necessarily those of the company.