Managing the Public Sector Pay Squeeze

In April 17, the Living Wage will increase to £7.50 per hour.  For those that have adopted the London Living Wage it is currently £9.75 per hour.  Increases to these rates have consistently been higher than the 1% uplift to the pay bill awarded year on year to employers across the public sector. Whether individual employees enjoy an increase in earnings is down to local pay policy.  This mix of enhancing the earnings of the lowest paid whilst supressing increases to all other staff has significant implications beyond pay policy alone and challenges core organisational arrangements.
The differentials have been eroded between the lowest paid staff and their immediate supervisors or their managers. Public sector organisations most often rely on a layered hierarchy, particularly at the junior level, and in pay terms this hierarchy is being squeezed.  First line supervisor jobs become less attractive with post holders increasingly feeling under-valued. 
Public sector organisations invariably use job evaluation to determine jobs of equal value and the differentials to structure their pay and grading systems.   External determination of pay increases and pay rates inevitably creates risk.  By,

• Breaking the link between job evaluation / organisation grades / pay. 
• Leading organisations to make pay policy decisions which allows them to afford modest pay increases to some staff / jobs in the short term but which have long term equal pay consequences. 
• Defaulting to an upward spiral of job evaluation and grading reviews simply to reward performance and retain staff.

Significant progress is being made to introduce entry levels posts and “grow your own” opportunities.  But unless these employees can see meaningful next career steps, that are appropriately rewarded, organisations risk being a springboard to other employers who can offer their next, promotional opportunities at competitive pay.
It looks like externally determined pay levels and pay restraint in the public sector are here to stay.  Employers cannot continue to bolt these on to pay and organisational arrangements set before the austerity began.  A rethink is needed. There is a need to ensure that; the full value is being gained from those paid at Living wage, (national or London); traditional hierarchy is challenged, removing layers, creating ‘bigger’ jobs, not only at junior level but at each step throughout the organisation; prompting a debate on how jobs are rewarded; challenging the attractiveness of jobs, including guarantees for career pathways albeit with deferred gratification.
Whilst at a National level the messages on public sector have not changed significantly since 2010, the consequences for local employers are being felt more greatly year on year.  It’s time to work within these constraints and fundamentally review pay and organisational arrangements together finding a local solution which understands the operational need but in the knowledge that pay alone will not be the incentive for taking on extra responsibility.
 
Picture Copyright: <a href='https://www.123rf.com/profile_koya79'>koya79 / 123RF Stock Photo</a>

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