The government will hold a review on whether to introduce differing regional public sector pay deals.
During his delivery of the Budget report, Chancellor George Osborne said he wanted to make public sector pay more responsive to local pay rates.
Daniel Hibbert, a principal in Mercer’s human capital business, said: “A change to local pay deals would represent an important step along the way towards enabling the public sector to align reward more closely with the needs of local services.
“It also brings pay management into line with the localism agenda, removing the anomaly whereby pay continues to be determined through national bargaining processes, while other similarly complex and important decisions are made at a local level.
“National pay rates assume there is a national job carried out in the same way throughout the country, but the reality is that public services and the jobs within them need to be tailored to fit a wide variety of different sizes and types of organisations, responding to the needs of local services.”
Charles Cotton, reward adviser at the Chartered Institute of Personnel and Development (CIPD), added: “We welcome the opportunity for employers to determine pay and benefits that meet the needs both of their local labour market and their budget.
“The frequent reliance on uniform, union-negotiated pay deals and length of service as a determinant of individual pay progression has ensured there is a disconnect in the minds of many public sector workers between their performance and the pay they receive.
“We need to move beyond this to an approach in which individual and collective performance and achievement of results becomes a significant determinant of public sector pay.”
Read more articles on the Budget report 2012
In today’s Budget George Osborne announced that the government is looking to make public sector pay more responsive to local pay rates in areas where the public sector pay freeze ends this year. Catherine Wilson, employment partner for Thomas Eggar LLP, shares her views on this change to employee pay:
“Mr Osborne’s focus seems to be on enabling rather than compelling change. Changes to pay and conditions are always very difficult to achieve but in the current recession have become commonplace as an alternative to redundancy. However, there is no culture or history of doing this in the public sector and it is likely to meet significant union resistance.
“Regionalised pay rates are not necessarily discriminatory but selective implementation could have adverse consequences. For new or perhaps promoted staff salaries could be cut but this could also lead to equal pay issues. Offering a promoted member of staff less than others doing the same role based on the market forces argument could risk equal pay arguments, particularly if more female employees are affected when compared to male incumbents.
“Equally, deciding to use reduced regional pay rates for jobs that happen to be female dominated and not others could risk the argument that such actions are sexually discriminating and therefore unlawful.
“The local government and NHS have been hit with a large number of very expensive equal pay claims over recent years, so the public sector will need to tread very carefully to avoid similar expense.”