Steady Growth but Changing Times

Summary of Public Sector Reward Trends:

The overall picture of rewards in the public sector is one of growth that slowed down over 2006. This is supported by recent data from the Office of National Statistics (www.statistics.gov.uk), which highlights that average earnings in the public sector increased by 3.3% in 2006, compared with 3.9% in 2005. However, for management levels, and according to Incomes Data Services (www.incomesdata.co.uk), base pay awards have risen to 3.9%, from 2.8% a year ago. This trend of overall slowed-down growth for non-management levels looks set to continue for this year given the Treasury's recent remit of a basic award being no greater than 2% with a Civil Service average increase to the pay bill of staff in post of no greater than 3.5%.

Additional reward trends include:

• Performance Bonuses
  • Whilst performance bonuses continue to gain ground in the public sector, the prevalence and award levels of bonuses creates a key difference between the public and private sector, particularly for management levels. Steps are being taken to address this with the recent Civil Service Pay Guidance and the Senior Salary Review Body Report both advocating an increase in variable pay.
• Market --Based Rewards
  • With the Treasury steer to re-organise pay structures to recognise different workforce groups and to reflect regional pay variations, increasing consideration needs to be given to how to reconcile this with current reward practices. One major government department has recently introduced such a market-based approach and this has had a number of implications for their reward management, not least of which from the perspective of seeking support for this approach from the trade unions.

As a result of these reward trends, particularly on market-based rewards, we expect to see some interesting new aspects to pay remits involving the provision of more detailed business cases that are focused on creating real value. This could lead to a number of more radical proposals than we have seen in the past and more generally may lead to some wider changes in the way that rewards are managed in the public sector.