How to be a Civil Servant

Civil Service Pay

Apart from the Senior Civil Service (see further below), there are no government wide pay systems. Subject to Treasury approval, each department is encouraged to establish reward structures and pay scales which meet their own particular needs. Annual increases in pay scales are then negotiated with the Treasury in the form of an annual “pay remit”.

It is therefore dangerous to generalise about civil service pay – but here goes!

First, the most senior civil servants are paid less than half of their private sector equivalents. But pay rates improve, relative to the private sector, the further one descends through the ranks, to the extent that the very lowest grades are paid relatively well. This is because there has been an understandable tendency, over many years, for unions, senior managers and Ministers to “look after” those on the lowest pay. But it cannot be stressed too strongly that such pay nevertheless does remain low in absolute terms, as do the pensions that result from such low paid employment.

Second, the civil service offers a very good final salary pension scheme. Contributions to the premium scheme are only 3.5%, but the employer is charged another 22% on top, so this has to be taken into account when comparing civil service and other salaries.

Third, there has over recent years been a move towards paying non-pensionable bonuses, rather than increasing salaries. This reduces the total and long term cost to the exchequer.

Fourth, there is these days no more job security in the civil service than outside it:- see separate notes on civil service numbers and "Can Civil Servants be Dismissed?".

The Senior Civil Service

Although there are only 4,000 of them (less than 1% of the total) a good deal of attention is paid each year to the salaries of the SCS. This is because

• they are very well paid relative to the taxpaying population at large, and yet …
• they are very poorly paid relative to their private sector counterparts, even though …
• their jobs are these days no more secure than those of those same counterparts.

Let's look at each of these factors in turn.

No member of the SCS is on the bread line. The vast majority earn between £55,000 and £100,000 and Permanent Secretaries (heads of department) earn £137,000 and more.

But equivalent private sector salaries are much higher. Here are some quotes from the 2006 report of the Senior Salaries Review Body.

• "Even at the lowest level in the SCS sample, base pay has fallen behind the private and broader public sector markets.
• Base pay of the sample becomes progressively less competitive as job size increases.
• Comparison with the market closest to the SCS, London local government, shows the SCS sample earning significantly less.
• Comparison of total cash (i.e. including bonuses) exacerbates the disparity between the SCS sample and the private sector market.
• SCS pensions remain competitive at lower levels. However, the annualised cash value is not competitive at higher levels compared with other defined benefit schemes because SCS salaries are so far below market levels.
• Total remuneration is significantly below private sector figures.
• Intangible benefits such as job variety and interest, maternity benefits and ability to influence were all quoted as compensating benefits of working for the SCS.

Further detail is in Hay's 2005 Pay Market Comparability Study which contains the following telling chart. (The bottom two lines are SCS remuneration inc. pension; I&S = industrial & service sector, excluding finalncial servicees and main board members; TR = total remuneration.)

Turning to job security, the same report notes that, although SCS staff turnover remains low at around 10%, it is on a rising trend. Also, of the 373 members that left the SCS in 2004-5, only 141 had reached retiring age or died. The other 237 resigned or came to the end of fixed term contracts or were encouraged to leave with the help of early retirement packages. It is therefore only a minority of the SCS that survive through to retirement age. Just as in the higher levels of the private sector, there is a high attrition rate at age 50 and above.

Further Detail

Overall, therefore, low pay persists because most of the SCS find their work to be very rewarding, in the non-financial sense. Nevertheless, strains are beginning to show. The following are further quotes from the 2006 report of the Senior Salaries Review Body.

• “Since 2002 we have had made clear in successive reports our view that the Government was failing to fund the SCS pay system in such a way as to meet its own targets for speed of progression. As pay at the most senior levels in the private sector and, to a somewhat lesser extent, in the wider public sector has continued to increase more rapidly than overall earnings, SCS pay has fallen further behind, especially at [Grade 3/Under Secretary] and above.”

• “The Government acknowledges that it is proving more difficult to recruit high quality candidates from the private and wider public sectors, and that to do so it has to make extensive use of the top end of the SCS pay bands to attract strong applicants.”

• “Overall, the [Civil Service] Commissioners think the system is just about flexible enough to allow for the recruitment of people from outside the civil service, though they note a number prefer to come on secondment or, if from the NHS, to retain their salary package, because of the greater benefits they can secure by these means. However, they believe that salary will increasingly become an issue for another reason. Civil servants might have been willing in the past to accept lower salaries than those on offer in the private sector because other elements of the package were attractive, e.g. job security and pension, and they recognised that private sector salaries reflected an element of risk and greater job insecurity. This is changing. The overall package for the civil service is beginning to come under pressure and the civil service has yet to work through the implications. Against this background, the Commissioners are concerned at the disparity between the salaries on offer to successful non civil service candidates and existing civil servants.”

• “We drew attention in our twenty-seventh report to the growing evidence that those joining the SCS from outside are paid on average significantly more than existing civil servants. Sir Andrew Turnbull also acknowledged the problem in his valedictory speech as Cabinet Secretary, and the Civil Service Commissioners commented on it in their evidence to us this year, as did the Government itself which said: “To attract strong candidates we are having to make extensive use of the top end of the SCS Pay Bands. This is leading to widening and unsustainable differentials between external and internal recruits, the so called ‘dual market’.”

At Grade 3/Under Secretary level, for instance, the SSRB noted that internal recruits were appointed at salaries which averaged £92,000, whilst the equivalent figure for external candidates was £102,500.

Other points worth noting are as follows.

As with more junior officials, the government is trying to switch SCS remuneration away from pensionable salary into non-consolidated (that is non-pensionable) bonus. In 2006, for instance, average SCS pay is targeted to increase by 1.75%, (2004 2.0%, 2005 2.7%) whilst bonuses will increase to 6.5% of salary (2004 4.0%, 2005 5.0%).

Apart from saving money, bonuses are also intended to reward different behaviours to those rewarded by permanent salary increases. The key differences are as follows:

Salary is intended to reward an individual’s value to the organisation and sustainable contribution as a member of the SCS. It should reflect size and challenge of the job; professional and leadership competence; an individual’s market value; and track record of delivery in so far as that gives assurance of future sustainable performance.

Non-consolidated bonuses are intended to reward delivery of personal in-year business objectives or other short-term personal contributions to wider organisational goals. Eligibility for bonus should be judged in relation to performance against agreed priority targets, total delivery record over the year, relative stretch of objectives, and response to unforeseen events which affected the performance agreement.

The salaries of individuals within the SCS as at 1 April 2006 will have risen on average by 3.25% (2004 3.5%, 2005 4.2%). The difference between this figure and the 1.75% mentioned above is due to "recycling":- the loss through retirement etc. of higher paid civil servants and their replacement by those recuited on lower salaries.

This is a complex subject and I would be glad to be corrected if I have misunderstood or over-simplified anything. Please therefore email me if you have any comments on this web page.