Dear colleague

ADVICE TO MEMBERS - PAY REFORM OFFER

As you may be aware, PCS received the final pay offer from the Department on 10 September 2014. The purpose of this circular is to:

  • Set out the key elements of this offer
  • Highlight the main PCS concerns
  • Focus on various important points of detail
  • Provide some relevant background
  • Identify what happens next

KEY ELEMENTS OF THE OFFER

General

  • The offer covers boththe Department’s desire to end contractual pay progression and the 2014 annual award.
  • The offer (which includes the cost of honouring the appropriate milestones) represents a 3.3% increase in the total paybill during the 2014-15 financialyear.
  • The pay settlement date for this year only would be 1 December(i.e. it would apply for only 8 months).
  • All employees would receive a pay award/increase of at least1.5%.
  • 4% plus increases to allminima.
  • 2% plus increases toSEO and G7maxima, 4% plus increases to HEO maxima,
  • HoweverEO maxima to only be increased by 1.5% and AO andGrade 6 maxima to be frozen.
  • Existing allowances would be frozen.
  • No reference made to pay issues concerning certain ex-GON and ex-RDA staff
  • All elements would be paid on a pro-rata basis to part time staff.
  • No details provided regarding the design of a future DCLG pay system and how staff wouldprogress within it.
  • Performance related progression wouldnot be introduced until2016/17 at the earliest and would not be contractually incorporated.

Specific

  • Staff already on or above their maximum(the majority in DCLG) to only receive a 1.5% increase(non-consolidated for AO and Grade 6 staff, may be partly or fully non-consolidated for other staff above maximum).
  • Staff due to reach maximum on or before 1 December 2015 to receive 1.5%plus reserved right to an increase worth the value of the final milestone step.
  • Front loaded consolidated increases for around 400 staff with progression entitlements after 1 December 2015 in return for ultimately accepting being marooned at a lower salary at the end of the ‘calculation period’ (the time up to the date when they would have reached their maximum).
  • Staff with these progression entitlements to also receive an up front non-consolidated lump sum(flat rate by grade).
  • Consolidated increases for staff at or near the bottom of pay ranges to at least the new pay scale minima.
  • MostAO and EO staff would do relatively badly under the offer.
  • Introduction of an AO spot rate at theAO maximafrozen since 2010.
  • Only£1000 non-consolidated lump sum for AOstaffin return for surrendering theirentire existing contractual right to RPI linked pay increases and progression.

Please also refer to the attached Excel spreadsheetwhich sets out the key implications of the pay offer for each distinct group of staff (broken down by grade, location, status and position on pay scale).

MAIN PCS CONCERNS

From the outset, and in response to management’s stated desire for ‘pay reform’, PCS has been very clear that the negotiations must focus in detail upon producing a coherent new pay system- rather than just upon management’s desire to ‘buy out’ the existing contractually guaranteed milestone progression arrangements. We believe that in order to be able to objectively assess the acceptability or otherwise of any proposed ‘buy out’ approach, staff need to understand not only what it is that they are being asked to give up, but also crucially what it is that they are being asked to accept in place of the current pay system. If however management simply buy out (and thereby abolish) these milestones, then there would be no known and reliable means by which staff may move in future to their pay range maximum.

In addition, abroadly ‘cash neutral’ buy out approach to be achieved through initial front loaded increases (the value of which is later ‘clawed back’) is unacceptable to the PCS DCLG HQ National Branch. As a minimum, we believe that staff must be offered substantive short term compensation for any long term loss of earnings suffered (accompanied by a realistic prospect of reaching their previous maximum in a reasonable period of time).

It is very clear that the offer does not meet the aspirations of members in a number of key respects. PCS is particularly concerned that:

  1. A significant number of staff (including at the two most populated grades of HEO and Grade 7) risk in the medium term being left permanentlymarooned on salary levels significantly below their current maximum without any clear mechanism for ensuring that they have a realistic prospect of reaching either their previous maximum or the new maximum for their grade within a reasonable period of time. This would have a long term detrimental effect on pensions, pension lump sums and severance terms.
  2. A 1.5% increase represents a further cut to the real term living standardsof the majority of staff who are approaching, at or above their maxima - and particularly when it is borne in mind that it would not be implemented until four months after the established pay settlement date of 1 August.
  3. The overwhelming majority of the lowest paid staff in the AO and EO grades would receive particularly poor salary outcomes as a result of this pay offer. The offer does not appear to take serious account of the potential value of the upcoming court case regarding the contractual entitlement of AO staff to annual RPI linked pay increases (and indeed wrongly presents the Department’s own views on this case as established fact). It is in any case not acceptable that many of the lowest paid members of staff in the Department would once again receive no consolidated increase to their salaries. Separate guidance will be issued to AO members.
  4. The offer makes no reference to the PCS suggestion that a fair and rational way forward with regard to affected former GO Network staffis for DCLG to agree to honour the outcome of the legal action taken by BIS staff regarding their claimed entitlement to progress to a previous higher GON maximum. The offer also makes no reference to how the range of existing progression and bonus arrangements for former RDA staff are to be accommodated within any new pay system.
  5. The offer lacks any substantive detail around the future design of a coherent and acceptable new pay system including:
  • What is intended to be the fundamental rationale underpinning the new pay arrangements.
  • Necessary assurances regarding the extent, nature and time period of the ‘durability’ of any new arrangements for pay progression.
  • Whether it is envisaged that there would be pay scales with fixed salary points that all staff would be placed on or a more fluid set of pay ranges.
  • Whether it is intended to establish some sort of inter-relationship between the relative values of the new pay scales/ranges.
  • Whether there are to be any type of ‘safety net’ arrangements to help ensure that individuals do not end up earning salaries at complete variance with counterparts possessing similar levels of responsibility and experience.

The Department hasbeen reluctant to discuss these crucial pay system design issues and did not do so (without any outcome being reached) until the final meeting with unions held on 4 September. The Department is not so much ‘unable’ to make any further adjustments or enhancements to the offer as ‘unwilling’.

  1. There is a relatedlack of clarity as to how the Department envisages staff progressing towards their maxima (both existing and future) in any new pay system. It is abundantly clear that the attractiveness to staff of any milestone ‘buy out’ offer will be strongly influenced by the nature and likely durability of the proposed new pay system - i.e. what prospect if any (and for how long) would staff have of moving within the new pay system if they agree to surrender their current guaranteed milestone arrangements.
  2. Any proposal to link pay progression to PMR outcomes would blatantly ignoretheserious equality related problems in the PMR system affecting BME, disabled, part-time and lower grade staff within DCLG and its predecessors which have occurred since the late 1990s and resulted in the Department’s welcome decision to abolish PRP in 2011. It unfortunately appears that the new PMR system with its highly subjective ‘How’ criteria and its ‘guided distribution’ figures (in reality quotas) has not redressed these serious flaws. The reference in the offer to postponing introducing performance linked pay until 2016-17 does not fundamentally address either our opposition in principle to linking an individual’s future pay progression to their perceived level of performance or our longstanding concerns about the serious equality related problems associated with both the current and previous PMR appraisal systems. The Department’s contention that it has “consciously taken into account equality issues” is therefore not convincing. In addition, the assumed 1% cap on future pay budget increases means that any future performance related pay system will result in the majority of staff (those with an Achieved marking) receiving less than 1% - i.e. yet further cuts to the real value of their salaries.

IMPORTANT POINTS OF DETAIL

Front loading approach

The Department’s basic approach in this regard is to offer individuals possessing contractual progression rights an immediate additional salary increase in the short term on the basis that they will then ‘claw back’ this amount in the medium term with the result that they end up on a lower salary in the long term.

The impact of this approach wouldvary considerably depending upon anindividual’s grade, position within the pay range and length of service. However the following example provided to unions by the Department should help to illustrate the general point.

An SEO in London who is on the 2 year milestone as at 1 December 2014 would receive a consolidated increase of £975 giving them a new salary of £36997 (a2.7% increase). They would earn £1868 more over the five year period than they would have had they remained on the existing pay system as detailed below. They would also receive a non-consolidated lump sum payment of £2250. However they would end up from December 2019 onwards on a salary £3256 below their previous maximum. As a result this individual would be permanently ‘out of pocket’ from April 2021 onwards.

Date / Under the offer / Current system
1 December 2014 / 36997 / 36022
1 August 2015 / 37367 / 36022
1 August 2016 / 37741 / 37939
1 August 2017 / 38118 / 37939
1 August 2018 / 38499 / 38824
1 August 2019 / 38884 / 42141
Total earnings / 150724 / 148856

Non-consolidated awards

The offer includes the following non-consolidated awards for those staff who would otherwise retainpay progression entitlements after 1 December 2015 in exchange for the surrender of those entitlements.

AO** / £1000
EO and equivalent / £1350
HEO and equivalent / £1800
SEO and equivalent / £2250
Grade 7 / £4050
Grade 6 / £4300

These flat rate awards would be paid regardlessof how close or far an individual member of staff is from their previous maximum after 1 December 2015. The significant relative gap between the proposed awards for SEO and Grade 7 members of staff is apparently a result of the longer period of time (8 years) covering the milestone arrangements for the latter grade.

** In the case of eligible AOs, the award would be for the surrender of their existing annual entitlement to RPI increases.

PCS is representing two complainants in the Employment Tribunal between 19 and 25 September for breach of contract for the failure to uplift AO pay in line with RPI in 2010, 2011, 2012 and 2013. If this claim is successful all AO members would be due substantial pay rises.

A specific further bulletin will be issued to AO members setting out why PCS attaches such importance to protecting these contractual entitlements and the likely financial implications for members in the event of success. It is important that those colleagues who are now being invited to surrender these important rights for a mere £1000 non-consolidated lump sum are fully aware of how much they potentially stand to lose in terms of backdated increases and future salary levels in the event that the PCS claim is upheld either fully or in part.

New pay scales

Grade / New min / % increase / New max / % increase
AO National / 22194 / N/A / 22194 / 0.00
AO London / 25847 / N/A / 25847 / 0.00
EO National / 23175 / 4.02 / 27338 / 1.50
EO London / 26000 / 4.20 / 30614 / 1.50
HEO National / 28180 / 8.14 / 32780 / 4.05
HEO London / 31000 / 8.13 / 36050 / 4.02
SEO National / 33920 / 4.97 / 40002 / 2.14
SEO London / 36500 / 4.96 / 43002 / 2.04
Grade 7 National / 44555 / 9.06 / 53490 / 2.00
Grade 7 London / 48500 / 9.00 / 58258 / 2.00
Grade 6 National / 53625 / 6.81 / 64438 / 0.00
Grade 6 London / 58500 / 6.70 / 70375 / 0.00

PCS believes that there needs to be both a clear rationale set out for eachproposed new scale - and that the resulting increases to minima and maxima need to recognise the extent of the long term decline in the real term living standards of DCLG staff. Bearing in mind that the maxima for most staff has been frozen or virtually frozen for at least five years now, we believe that the proposed increases to the maxima are not adequate - and regrettably in the case of certain grades, are either woeful or non-existent.

RELEVANT BACKGROUND

Pay reform talks were originally supposed to have begun in the late springof April 2013; then as part of the formal 2013 pay review talks; and then in the autumn of 2013. The fact that none of those commencement dates happened was on each occasion a management decision. However the belated start to engaging unions should not be an excuse for now rushing the design and launch of a new pay system and buy out of staff’s existing rights

The parameters and timescales set out by the Treasury has clearly had adetrimental impact upon the Department’s negotiating position. The insistence placed by the Treasury upon arbitrary and inflexible criteria around so-called ‘affordability’ and ‘value for money’ considerations has been deeply unhelpful. It is particularly unfortunate - bearing in mind management’s contention earlier this year that the ‘justification’ for once again freezing the existing pay maxima was in order to not unfavourably influence the Treasury’s consideration of how they might support ‘pay reform’ within DCLG - that no additional funds at all have been made available by the Treasury for this major initiative.

The reality of the current situation nevertheless is that individual members of staff and/or their trade union representatives are only likely to seriously consider an offer which is sufficiently attractive to possibly merit staff surrendering their current guaranteed milestone arrangements. PCS has therefore urged the Department as a matter of priority to seek to engage the Treasury in further discussion about their making additional funds available and/or relaxing the current constraints.

WHAT HAPPENS NEXT

PCS intends to hold membership consultation meetingsacross most of the various DCLG workplaces in the near future. We have requested that additional facility and travelling timeis granted to both the three pay negotiators and members to help ensure thatconsultation on this major initiative is as extensive as possible. Management have indicated that they are content in principle to agree to this. Further details regarding the dates and venues of these meetings will be issued shortly.

PCS fully recognises that the offer is potentially quite complicated to understand and that many of the crucial questions regarding future pay systems and salary levels remain unanswered. We will issue further written advice as necessary and in addition, the three pay negotiators will be available to answer any questions or concerns (both at the consultation meetings and more generally).

In the meantime it would be really helpful if initial feedback on the management offer and the concerns identified could be provided in writing to the PCS pay negotiators - Chris Hickey (), Paulette Romain () and David Jones ().