Workplace Report (January 2018)


Unions get ready for action over public sector pay cap

Civil servants want the Tories’ 1% pay cap scrapped. A Workplace Report analysis of UK civil service awards shows a mix of approaches to pay, with most having a performance-related element, a mixture of consolidated and non-consolidated payments, and some targeting of specific staff groups for higher awards. 

The PCS civil service union says it is getting workplaces ready should a statutory ballot be necessary, after a large majority (79%) of members in a union consultation at the end of last year said they were prepared to take industrial action if the government continues to refuse to scrap the pay cap. Nearly all (99%) of those voting agreed that the Conservative’s pay cap should be scrapped; and that funds should be made available for an above inflation pay rise. 

PCS says it is also in talks with the TUC and other unions about joint action on pay.

“Years of government austerity have forced down wages in real terms in the civil service and other parts of the public sector” PCS general secretary Mark Serwotka said in his new year message at the end of December. The civil service in particular has been under pay restraint since 2008.

Real-terms pay cuts

Research undertaken for the PCS last year by Mark Williams of the University of Surrey shows that between 2010 and 2016, median weekly earnings in the civil service had fallen by 8% to 9% measured against CPI inflation, compared to 3% to 4% in the rest of the public sector and 7% to 8% in the economy as a whole. 

Measured against union-preferred RPI, pay for civil service grades had fallen by up to 12% between 2010 and 2016.

PCS also points out that increased pension contributions since 2010 have reduced take-home pay by around £1,000 a year.

Williams said that the “true magnitude” of the cuts to average earnings in the civil service over the period was masked by changes in the composition of the civil service, with deep job cuts impacting on lower-paid administrative officers (AOs) and assistants (AAs) in particular. 

His report showed that civil service employment fell by 120,000 full-time equivalents (FTE) between 2010 and 2016. This included a loss of 92,200 AO and AA grade FTEs, accounting for over three-quarters (77%) of the total decline in civil service FTEs over the period. Jobs in the higher grades 6 and 7 actually grew by approximately 2,900 FTEs.

Pay remit

Unlike other areas of the public sector, there is no pay review body for civil servants below the senior grades. Pay for central government departments, non-ministerial departments and agencies, non-departmental public bodies and arm’s length bodies is set each year by the Treasury through the “pay remit”, overseen by the Cabinet Office.

This remit covers almost 400,000 staff. As in previous years, the Cabinet Office pay guidance for 2017-18 states that “pay awards will be limited to an average of up to 1%”. Unlike pay rises in some other parts of the public sector, the guidance stated all elements of the pay bill needed to be covered within the 1% increase, including increases to allowances, incentive payments for implementing pay reforms and any remaining progression payments. Increased employer national insurance and pension contributions were, however, exempt from this. 

Automatic progression in the civil service has largely been halted in recent years, with the government announcing in 2015 that it had agreed with all departments on removing any remaining entitlement to contractual progression pay. The 2017-18 guidance reiterated that departments should now have removed automatic progression pay from their workforces “which should not be reintroduced.” 

Automatic progression remains in some cases where it is a legal entitlement. But the guidance states that any progression pay arrangements not agreed with the Treasury will be in breach of government policy and must be notified immediately.

Higher increases in pay at the lower end of the pay scale to ensure compliance with the National Living Wage (NLW) also need to be met within the overall pay bill increase. 

Each department also agrees a fixed percentage of the pay bill that can be used for a non-consolidated performance-related pay pot, but can negotiate with the Treasury to reallocate some of this performance pay pot to funding for targeting incentives to address recruitment and retention pressures. 

LRD Payline analysis

Workplace Report has analysed more than 20 pay awards for 2017-18 from UK government departments and other government agencies and bodies on the LRD Payline database, gathered from union reps and Freedom of Information requests. In addition, 17 Scottish government department and agency awards were analysed, as was the Welsh government award (see box on page 16). 

Workplace Report’s analysis of UK civil service awards shows a mix of approaches being used, with most having a performance-related element, a mixture of consolidated and non-consolidated payments, and some targeting of specific staff groups for higher awards. 

In the absence of automatic progression and as a way of overcoming the problem of staff stranded towards the bottom of pay ranges, staff on lower positions within pay ranges are usually getting higher consolidated payments provided they meet satisfactory performance standards, while those higher up and close to or at the maximum are commonly receiving pay awards that are more loaded towards non-consolidated elements. 

In some cases pay awards have been combined with an ongoing process of reform of pay structures, with the goal of reducing pay ranges within particular pay grades or replacing them altogether with a single spot rate for each grade. Government employers doing this, for example the Department for Work and Pensions (DWP), have been granted additional discretion over pay awards in order to implement the reforms (see box on page 17 for its pay grades).

“Government departments and agencies are trying to do lots of different things with not enough money …. with limited flexibility and extremely limited resources,” Martin McIvor, research officer of the Prospect managers and specialists’ union told Workplace Report. 

Performance management

Pay awards over the last year have also come as departments have been implementing new performance management frameworks. The Cabinet Office indicated at the end of 2016 that the discredited “guided distribution” performance management framework being used across the civil service, whereby a fixed proportion of staff were placed within pre-determined assessment categories, would be ending. However, traces of the old system still persist. 

Under the previous system, managers were typically required to rank 10% of their staff as poor performers (the “must improve” rating), 65% as satisfactory, and 25% as performing well (the “exceed” rating). A non-consolidated performance bonus was awarded to employees marked in the top two boxes, with a higher payment for those in the top “exceed” box. The payments were calculated as a percentage of basic pay meaning those on higher grades got higher bonuses. Those in the bottom “must improve” box either got a small amount or no bonus at all. 

An analysis of system outcomes commissioned by PCS highlighted its discriminatory impact with black and minority ethnic, disabled, older and part-time staff more likely to receive a “must improve” rating and less likely to receive an “exceed” rating. Analysis by PCS in the Ministry of Defence (MoD) showed that the system was costing £98 million a year to administer in just that department. 

The Cabinet Office subsequently announced a new framework for performance management which would allow greater flexibility as to how this would apply in each government department. And four larger departments — HM Revenue and Customs (HMRC), the DWP, the MoD and the Home Office committed to moving to a new system last year.

This process of implementing new systems “has been going at different speeds with some departments making bigger changes this year than others”, McIvor said. 

While the “guided distribution” element has been dropped, the old performance categories are still in place in a number of government departments, including the Department for Culture, Media and Sport (DCMS), Department for Transport (DfT) and Department for Environment, Food and Rural Affairs (Defra), and were used to determine the level of pay increase in the 2017-18 pay award. 


In the Defra pay award from 1 July 2017, staff categorised in performance box 1 (excellent) and box 2 (good) got a 2% award and staff in box 3 (additional support and development required) got a 1% award. But increases were paid as a mixture of consolidated and non-consolidated payments with those at the lower end of pay scales getting a higher consolidated element, allowing them to progress further up the pay range.

A PCS full-time official told Workplace Report that although Defra had previously maintained that the guided distribution system was not “forced” anecdotal evidence suggested that the guide was “indeed forced”, with managers being given the objective of ensuring that rankings met the distribution curve. 

Although Defra had scrapped the guided distribution last year, “the change in culture didn’t really follow and the spread of box markings remained similar,” the official said. But the union was “pushing hard to break the link to base pay and performance during a review of the performance management system” and believed it was close to a breakthrough on this. 


At the DfT, staff with a box 1 or box 2 performance mark received an award equivalent to at least 1% of the midpoint of their pay range. Staff with a box 3 performance mark received an award equivalent to at least 0.5% of the midpoint of their pay range (underpinned by a minimum £100). Staff under poor performance measures did not receive an award. There was also a non-consolidated performance-related bonus payment for staff in box 1.


At DCMS, staff with an “exceeded” or “met” performance marking received a basic pay increase calculated as 1% of the median of the pay grade from August 2017. But staff whose pay already exceeds the maximum of their pay grade received their award as 12 monthly payments. For those with a “must improve” rating or subject to formal poor performance procedures, there was no basic pay increase or non-consolidated payment, apart from where their pay would otherwise fall below the minima of their pay range. Pay range minima were increased by 1.5% and pay range maxima by 1%. 

Defence Equipment and Support

At Defence Equipment and Support (DES) an arms’ length body of the MoD, a “guided distribution” performance management framework, however, remains in place. 

A new grading system was introduced at DES in August 2017, moving away from the previous MoD grading system. This assigned staff to one of approximately 250 role profiles, each benchmarked against an undisclosed private market benchmark. Most functional allowances and some general allowances were discontinued and consolidated into base pay. 

A consolidated pay award backdated to April 2017 was made to individuals dependent on their performance and relative position against the market benchmark. 

One in 10 staff (10%) were expected to be given an “exceptional” rating and get a pay increase of between 2% and 10%. One in five of staff (20%) were expected to be rated “very good” and 40% “good” with increases ranging between 1% and 7.5%. And 20% of staff were expected to be given a “partially achieved” rating and get a 1% pay increase while 10% of staff were expected to be given a “performance improvement required” rating and get no pay increase. Non-consolidated and non-pensionable performance bonuses were also paid to the top 70% of staff. 

Other government departments

At the MoD itself and at other government departments, payments followed the pattern of mixing consolidated and non-consolidated payments, with higher increases to those in the lower reaches of pay ranges, and increases lower or withheld altogether for those in poor performance measures. 

Department for Education

For example, at the Department for Education, all staff received an award calculated as 1% of the midpoint of their pay band increase, or £310, whichever was greater. Staff at or near the top of their pay band received some or all of their increase as a non-consolidated lump sum. Staff whose pay was below the 2016 pay band minima had it uplifted to the new 2017 minima, except those in formal poor performance procedures who had it uplifted to the 2016 pay band minima. 


At HMRC, there was a flat rate consolidated award of 0.8% of the 2016 maximum of each pay range. But staff being managed under poor performance procedures did not receive the pay increase, except for AAs as they are paid on a single spot rate. There were also additional non-consolidated payments for staff with “exceeded” performance ratings.

Department of Health

At the Department of Health, increases were calculated as 1% of the median salary by grade, with slightly higher percentage increases for staff lower in the pay scales. For staff at or nearing the maximum of their pay scale, any award which would have taken them over the maximum was paid as non-consolidated. Staff subject to poor performance procedures did not receive an increase. 

home Office

Staff at the Home Office received an award of at least 1% through a combination of consolidated and non-consolidated elements (apart from staff with an unsatisfactory performance rating who were not eligible for a pay award). 

The minima for HEO, grade 7 and grade 6 were increased in order to reduce pay range lengths with staff repositioned on to the new pay range, and there was a non-consolidated top up to a 1% increase for any eligible staff who did not otherwise receive 1%. There was also a non-consolidated payment of 2% of the relevant salary range maximum for top performers.

Ministry of Justice

At the Ministry of Justice, there was a consolidated 1% increase for all staff below the maximum of their pay band, with 1% non-consolidated for those above. This applied to all staff except those on formal poor performance procedures. There were also additional non-consolidated, performance-related awards for “outstanding” performers. 


At the DWP, there was a four-year pay agreement in 2016 involving reformed pay scales (though staff could opt-out and remain on old scales). In order to implement the pay reform, the DWP was granted greater flexibility on pay increases. 

The reformed pay structure involves moving towards spot rates for each grade and pay zone over the course of the four years and reducing pay zones from four down to two, national and London (merging inner and outer London and removing the specified location zone). Subject to satisfactory performance, staff receive an award of between 1.1% and 5% each year. But staff with a “must improve” performance rating or on formal poor performance procedures will not receive an increase. 

By the end of the four years, the majority of employees will reach a spot rate for the pay grade. There is also a non-consolidated pay pot each year. Staff who opted out of the new deal receive a 0.25% consolidated increase in each of the four years, and are also eligible for the non-consolidated payment.

Department for Work and Pensions pay grades

While there are no longer common civil service pay structures, the pay ranges in place at the largest civil service employer, the Department for Work and Pensions, are a useful guide. In the SEO, G7 and G6 grades the pay rates for Generalists

Grade /Pay Zone From 1 July 2017
Minimum Maximum
National £17,758 £17,758
Inner London £20,235 £20,235
National £18,478 £19,983
Inner London £22,649 £23,457
National £24,476 £26,061
Inner London £27,485 £30,195
National £28,307 £32,239
Inner London £32,430 £36,478
National £32,566 £38,700
Inner London £36,852 £42,841
National £45,905 £56,707
Inner London £50,476 £61,530
National £56,706 £69,407
Inner London £61,852 £74,957

For other government bodies, agencies, and regulators pay awards followed a similar pattern. For example, at the Health and Safety Executive, there was an overall pay bill increase of 1% from October 2017 with staff receiving a mix of consolidated and non-consolidated payments depending on position in the pay range, as well as additional bonuses for all except poor performers. 

At the Serious Fraud Office, pay increases were calculated according to a matrix based on performance and position within the pay range, with increases higher for higher performers and those lower down the pay range, and additional non-consolidated payments for staff at or near the maximum of the pay range. There was no increase for staff with ‘’improvement required’ or “unsatisfactory” performance. 

At the Crown Prosecution Service, things were relatively more straightforward, with a pay award from 1 April 2017 involving a 1% consolidated increase for all staff on salaries at or below the pay range maximum for their pay range, and a 1% non-consolidated payment for staff at the maximum.

Pay awards in Scotland and Wales

The 1% public sector pay cap has until this year applied throughout the UK, but the Scottish government broke ranks and announced last June that it would be lifting the cap from this year. 

In his budget statement in December, Scottish finance secretary Derek Mackay announced that public sector workers in Scotland would receive a pay rise in 2018 of 3% if they are earning £30,000 or less. Those earning more than £30,000 will get a 2% pay rise, apart from those earning more than £80,000 who will have increases capped at £1,600 (these increases will not apply to local government employees, with their pay delegated to local authorities). 

Scottish public sector pay policy for 2017-18 maintained the 1% cap, but with an additional fixed pay uplift of £400 for staff earning less than £22,000. Employers are also required to ensure that staff are paid at least the Scottish Living Wage (SLW), set at the same level as the UK living wage (£8.75 an hour from November 2017). 

Pay awards in Scotland for 2017 were set for a curtailed period up to 1 April 2018, when a new award will take into account the lifting of the pay cap by the Scottish government. 

Scottish government employees received a nine-month pay award from 1 July 2017, with a minimum 1% increase for all staff, consolidated up to pay band maximums with any amounts over paid as non-consolidated lump sums. 

There was also the £400 underpin for all staff earning £22,000 a year or less and salaries for the lowest paid staff (grade 11) were increased to the SLW equivalent of £16,320. All grade 11 staff were moved to grade 10, removing the lowest grade. 

Progression within the pay ranges also continues, with reform to the pay ranges to remove overlaps and reduce the number of pay points to no more than five years progression from minimum to maximum. For staff at the top of their pay range, there were non-consolidated payments ensuring a minimum award of 2% for all staff

Most other pay awards by Scottish government bodies and agencies were broadly in line with this approach but with some variation. However, there has been a more markedly different approach at Audit Scotland where there was a one-year pay award from 1 April 2017 with staff receiving between 1% and 6.92%, the median being 3.85%. The previous performance-related pay system has now been replaced by guaranteed progression by annual increments within a broad-banded pay structure with precise spine points. All staff moved to the closest spine point above their current base salary and then received an annual pay progression award of one incremental spine point (subject to the pay zone maximum), and with salary scales uplifted by 1%. 

The Welsh government says the public sector pay cap is a UK government policy and has called on the Westminster government to provide the funds in order for the cap to be lifted in Wales. 

There was a two-year agreement for Wales government employees last year based on a 1% pay bill increase each year. For the first stage of the agreement from April 2017, most pay scale maxima increased by £1000 or 2.25%, whichever was the greater. The increase was focused on the maxima of the pay scales in recognition that annual increments will continue to be paid for those progressing within their band. 

In the second year, from 1 April 2018, a minimum pay rate of £10 an hour will be created equating to an 11.86% increase for the lowest paid staff, with a commitment from the Wales government that the voluntary Living Wage of £8.75 an hour, as opposed to the government’s lower National Living Wage, will continue to underpin all pay policies and contracts.

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