Accounting for senior pay

The Localism Bill sets out some important provisions in relation to pay accountability and senior pay policy statements. Helen Cookson and Gerry Budd assess the requirements.

Pay policy statements: the basic provision

Clause 22(1) of the Localism Bill places a requirement on a relevant authority – which includes a fire and rescue authority (but not a police authority) – to prepare, annually, a statement setting out the authority's policy on the remuneration of its "chief officers" for the subsequent financial year. It can optionally also set out the authority's policies relating to other terms and conditions relating to those officers.

Following debate at the committee stage, this obligation was extended by an amendment to the Bill to include a duty in such statements to also set out its policy on the remuneration of its "lowest paid employees" (using a definition adopted by the authority – with the statement explaining why that definition was used) and importantly the relationship between the remuneration of chief officers and those employees who are not chief officers. "Senior Pay Policy Statements" are relabelled "Pay Policy Statements".

In preparing its statement, the authority must have regard to any guidance issued or approved by the Secretary of State (in England) or Welsh Ministers (in Wales), and must comply with it when making a determination that relates to the remuneration, or other terms and conditions, of a chief officer of the authority.

Further details and the issues arising

The coalition Government in recent times have issued various statements highlighting its policy stance in relation to what it sees as excessive pay for those at senior levels within the public sector, as evidenced by recent media coverage and the issue of a draft code of Recommended Practice (under powers in the Local Government Planning and Land Act 1980) for Local Government Data transparency which was published for consultation in February 2011 which suggests that an organisational chart should be published by authorities showing the names and responsibilities of staff paid over £58,200 per annum.

Whilst there has been much rhetoric, the relevant Under Secretary of State Bob Neill indicated the government's position in the committee stage debates in February: "of course, what we are doing in the clauses is not prescribed what a council's policy or levels of remuneration should be; we are simply prescribing that there should be a policy. What it is, how it is phrased and what arguments are made are entirely matters for the relevant council. If, for example, the council wishes to set out in its policy the reasons why it thinks appropriate remuneration should be paid and the nature of the job, that can be incorporated in the policy". In contrast in the same month the Secretary of State announced the intention to require all authorities wishing to appoint staff paid over £100,000 p.a. to obtain approval at a public meeting of the full council.

The detailed provisions

In addition to the aspects already outlined above relating to "lowest paid employees" and non chief officers any senior pay policy statement for a financial year must include the following matters:

• the level and elements of remuneration for each chief officer;
• remuneration of chief officers on recruitment;
• increases and additions to the 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.

It can also set out the authority's policies relating to other chief officer terms and conditions.

What does "remuneration" mean?

This is defined in clause 27(3) in relation to chief officers of a relevant authority as:

• their salary or where there is a contract for services payments made by the authority for those services;
• any bonuses payable;
• any charges, fees or allowances payable (which would include election fees);
• any benefits in kind to which the chief officer is entitled as a result of their office or employment;
• any increase in or enhancement of pension entitlement where that is the result of the resolution of the authority; and
• any amounts payable on ceasing to hold office or being employed by the authority other than amounts that may be payable by virtue of any enactment and for the avoidance of doubt any references to remuneration or other terms and conditions applying to a chief officer include those which may apply in the future or which may apply to chief officers of that kind that the authority may appoint in the future.

There are similar definitions for those employed by the authority who are not chief officers.

Who are "chief officers" for the purposes of senior pay policy statements?

These individuals are identified with reference to the tried and tested provisions for defining "chief officers" as set out in the Local Government and Housing Act 1989 with the addition of elected mayors of the authority if the authority has made arrangements specified in the new 9HA(2) of the Local Government Act 2000 (as proposed to be inserted by the Bill - Mayoral management arrangements – Mayor to be chief executive).

A policy statement must be approved by a resolution of the authority (i.e. the full council) before it comes into force and on the current timetable of the Bill the first policy statement is required to cover the financial year 2012-13 and must be prepared and approved before the end of March 2012. Once approved it can be amended by resolution even after the financial year is underway. Once approved or amended it must be published and it must always be published on the local authority's website as required by clause 23.

The Secretary of State by clause 24 (and Welsh Ministers as appropriate) have power to issue/approve guidance and authorities must have regard to any such guidance in performing their functions under clauses 22 and 23 concerning senior pay policy statements.

Clause 25 requires the relevant authority to comply with its senior pay policy statement for the relevant financial year when making a determination that relates to the remuneration, or other terms and conditions by the chief officer and the authority and makes the exercise of the power in relation to the appointment of staff under section 112 of the Local Government Act 1972 (and a corresponding provision for and fire and rescue authorities) to amend the provisions in relation to the authority's power to appoint officers on such reasonable terms and conditions as they think fit.  Clause 26 makes it clear that functions under these provisions cannot be exercised by the Executive and prevents the passing of a resolution on such matters from being delegated by the Council to a committee or an individual officer.

Issues and implications

Clearly care will need to be taken in relation to the preparation of the senior pay policy statement and close regard will need to be had to any guidance which the Secretary of State will issue which is likely to put a great deal more flesh on the bones as to how in detail these duties are to be discharged. In the light of the coalition government's stance in relation to senior public sector pay and the groundswell of opinion that closer and clearer links be made to those paid the least in organisations, it seems likely that the Secretary of State will seek to push the use of these powers to their limit.

Authorities will also have to decide whether their policy statement includes the optional aspects of including other terms and conditions applying to their chief officers and it will be interesting to see how authorities respond in this regard.

It would be prudent to review the council's constitution and its administrative arrangements in relation to the appointment and recruitment of chief officers so that they are fully reflective of these requirements once enacted and it will be particularly important to ensure that any actions or proposed appointments which are not compliant with an existing pay policy statement are identified and the necessary steps are taken to effect an in year amendment to the statement approved by the authority and the requirements for subsequent publication adhered to.

There are clearly also issues contractually for individual councils, and their chief officers to consider before varying individual contracts, should that be a consequence or desired course of action arising out of this statutory policy requirement.

Helen Cookson is a solicitor and Gerry Budd is a consultant at Trowers & Hamlins. Helen can be contacted on 0161 838 2081 or by email at This email address is being protected from spambots. You need JavaScript enabled to view it., while Gerry can be reached on 0161 838 2003 or by email at This email address is being protected from spambots. You need JavaScript enabled to view it..