Public sector senior pay plan unveiled by Will Hutton

Senior public servants' pay should be performance-related, but not subject to a cap, an independent review has said.

At least 10% of pay should only be awarded at the end of the year if objectives were met, a government-commissioned Fair Pay Review said.

Will Hutton, who led the review, ruled out a link between executives' pay and the lowest-paid on their staff.

But public limited companies and public sector bodies should publish details of pay level comparisons, he said.

Chancellor George Osborne said he would give the review "careful consideration", although there was no pledge to implement any of the proposals.

Performance

In May, Mr Hutton, of the Work Foundation, was asked to review public sector pay, especially the disparities between the lowest and the highest paid.

He has proposed an "earn back" scheme for about 20,000 senior staff. This would put a proportion of their basic pay at risk if they failed to meet pre-arranged performance targets.

But excellent performers who exceeded these targets should be eligible for extra pay.

"No pay system can be fair if it fails to reflect individual performance," Mr Hutton said.

Once implemented at senior level, such a system should be considered on a voluntary basis for middle managers, he concluded.

Other recommendations include:

• abandoning "arbitrary" benchmarks, such as comparisons with the pay of the prime minister

• more opportunities for managers to move across different public services

• executive pay details published in online form.

Pay link

The government suggested a ratio so that pay of top public servants would normally be no more than 20 times that of their lowest paid employees.

In his initial findings in December, Mr Hutton endorsed the idea, but the final report reversed this recommendation as it would be unworkable and only affect a small number of workers.

Instead, he said, there should be greater transparency over senior pay. He recommended that all executives' full pay should be revealed online, together with an explanation of job weight and performance.

"Organisations delivering public services should publish their pay multiples each year, and disclose and explain executive pay and how it relates to job responsibilities and individual performance," Mr Hutton said.

"This will allow an informed public debate on senior pay; citizens will be able to hold organisations to account on how senior pay reflects individuals' due desert."

He said that this should be a model across the whole economy, so he recommended that public limited companies should also be required to publish the ratio of pay between the highest paid and other employees each year.

Chancellor George Osborne said: "The government is committed to striking a balance between value for money for taxpayers and fair pay for public sector workers. We will give careful consideration to his recommendations and respond in detail in due course."

Response

Dave Prentis, general secretary of Unison, said: "The focus on top pay is a missed opportunity. To really boost fairness in the public sector, and our society as a whole, we need to tackle low wages - not just income inequality."

TUC general secretary Brendan Barber said the report was a welcome starting point for tackling "boardroom excess" in the private sector.

"Making PLCs publish pay multiples and introducing workforce representation on remuneration committees are welcome proposals that should be implemented in the Budget," he said.

But Katja Hall, chief policy director for the CBI - a business lobby group, said: "It is right that shareholders decide how pay is set. In the public sector this means it is for government to decide what the standards are.

"In the private sector, however, remuneration committees are responsible to shareholders. Shareholders, not the government, should decide how to split the pay budget in a way that gets the best results."