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Guidance for approval of senior
pay: applicable from 1 January 2018
December 2017
Guidance for approval of senior pay: applicable from 1 January 2018
December 2017
© Crown copyright 2017
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ISBN 978-1-912225-00-2 PU2080
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Contents
Chapter 1 Summary 2
Chapter 2 Introduction 4
Chapter 3 Senior civil service, public appointments, other executive posts
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Chapter 4 The process for approval: all posts & appointments 9
Chapter 5 Contact details 14
Annex A Pro forma for salaries/remuneration at or above £150,000 p.a.
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Annex B Pro forma for performance payments above £17,500 p.a.
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Chapter 1 Summary
1.1 The Government greatly values the important work that senior managers and executives perform in the public sector. These senior pay controls allow the Government to ensure that senior pay is set at an appropriate level to enable the public sector to recruit, retain and motivate the best people, whilst ensuring value for money for the taxpayer.
Process 1.2 Advance approval of the Chief Secretary to the Treasury (CST) is required for
remuneration packages at £150,000 or above, and performance (‘bonus’) arrangements of more than £17,500.1 The process required to seek approval is as follows:2
• organisation/department gains approval of their Permanent Secretary and appointing Minister
• organisation/department submits their case to the Cabinet Office using the attached pro forma
• Cabinet Office seek the view of the relevant Treasury officials
• Cabinet Office submits the case to the Permanent Secretary to the Treasury
• where appropriate, the Cabinet Office also seeks the views of the Cabinet Secretary and the Chief Executive of the Civil Service
• Cabinet Office submits the case, taking account of the Permanent Secretary to the Treasury’s view to the CST
• the CST approves/rejects the proposed package. Cabinet Office informs the organisation/department and provides appropriate feedback
1.3 Any deviation from this process represents a breach of the controls and departments may incur financial sanctions. For example, a breach is deemed to have occurred if:
• an individual is appointed on or offered a remuneration package in excess of the threshold without approval, or above the amount that was approved
1 See page 8 for application to part-time staff.
2 For organisations within the UKGI portfolio this process differs. See Chapter 4
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• an appointment is announced with a package the CST has not approved
• a role is advertised with a remuneration package above the threshold without CST approval
Considerations 1.4 Before making a request for a remuneration package above the threshold,
departments and the employing organisation must consider the following criteria:
• influence and impact of role
• the specialist nature of the role including the skills and experience required
• labour market considerations
• relevant supporting benchmarking data provided by Civil Service Employee Policy (CSEP).
• the package of the previous incumbent or any obvious comparators
• only when appropriate, biographical information
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Chapter 2 Introduction
Background 2.1 The CST approves pay and remuneration levels at and above a defined
threshold for all Civil Service appointments and appointments to public sector bodies which are subject to Ministerial approval.1 From 1 January 2018, the threshold will be £150,000 to align with the Cabinet Office senior pay transparency threshold.
2.2 CST approval will continue to be required for all performance pay (“bonus”) arrangements above £17,500 that are subject to Ministerial sign-off.
2.3 The purpose of this guidance is to clarify which appointments are covered by the arrangements, explain the process for securing approval, and set out the criteria departments should consider and record in preparing cases for approval. These are the substantive criteria that approvals are assessed against.
2.4 This consolidated document replaces the previously separate Cabinet Office and Shareholder Executive guidance documents.
2.5 For those appointments for which CST approval is not required, departments must continue to carefully scrutinise remuneration levels. All appointments must represent value for money to the taxpayer.
Principles 2.6 When setting senior pay, public sector employers and the sponsor
department (where relevant) must have regard to the following principles:
• ensuring value for money
• ensuring they can recruit, retain and motivate the best people
• fairness between grades and across the public sector
2.7 All requests for Treasury approval must explain in detail how these principles have been taken into account.
1 This process applies only to appointments requiring the approval of UK Ministers. Where officials are involved in appointments, it is
assumed that they are acting on behalf of Ministers. It does not apply to appointments made by Ministers in Devolved
Administrations. If in doubt, please contact the relevant officials in chapter 5 who will be able to confirm if the appointment is
subject to this guidance.
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Types of appointment where the senior pay level requires CST approval 2.8 The approval arrangements apply to:
• all Civil Service appointments with remuneration at or exceeding the control threshold
• all appointments made by Ministers to public bodies with remuneration at or exceeding the control threshold. This includes appointments made or approved by Ministers, made by The Queen on the advice of Ministers or made or approved by officials or public servants on behalf of Ministers. Accordingly, these arrangements cover the vast majority of public appointments, many appointments of Chief Executives and other senior executives of public bodies and any appointments formally delegated by Ministers to the Appointments Commission
• secondments into the Civil Service should be considered appointments and advance notice should be given before a department appoints a secondee with a remuneration package at £150,000 or above. Departments may be required to seek CST approval of the package
2.9 This guidance incorporates remuneration in organisations within the UKGI portfolio, where the remuneration is for an appointment that is subject to Ministerial approval. Such appointments will include those that are Ministerial appointments, but also those where Ministers have an approval right over an appointment made by the corporation, for example under relevant legislation or as a shareholder. It does not cover appointments within the corporation where the Secretary of State’s approval is not required. Any departure from these guidelines by public organisations should be agreed in advance with UKGI or relevant parent department (as appropriate) before coming to HMT.
2.10 In situations where formal Treasury approval is not required, it is expected that employers and sponsoring departments would undertake an assessment of the value for money case in line with the principles and criteria in this document. Current transparency obligations continue to apply
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Chapter 3 Senior civil service, public appointments, other executive posts
Application to existing staff 3.1 The approval process applies to appointments and any adjustment of salary
that takes an individual to or above the threshold1. The CST’s approval will not always be required where an individual’s pay moves to or above £150,000 following an annual pay award. In cases where awards up to and including 9% (i.e. the maximum standard base pay award permitted by the Cabinet Office for the SCS) take an individual over the threshold, the CST’s approval is not required. However, where an award of more than 9% takes an individual over the £150,000 threshold, this approval is required.
3.2 The CST’s approval is required if an individual passes or reaches £150,000 on promotion, through accelerated payments or from new allowances, even if on an interim or temporary basis.
3.3 The CST’s approval is also required if an individual is to be paid at or over £150,000 following contractual adjustments or on moving to a new post, even if previously paid at or over £150,000. If a contract is extended for the same individual on identical terms, including contracted hours and salary paid, then this does not require approval, save for when the previous CST approval for the individual’s remuneration was undertaken more than 5 years previous, the individual was originally appointed on an interim basis, or unless previously required as a condition of the appointment.
Application to existing office-holders 3.4 The approval process applies to any appointment or any adjustment of a
serving office-holder’s terms and conditions, which takes an individual’s total remuneration to £150,000 per annum or above – or to a pro-rata equivalent (see below). This includes any temporary or permanent promotion (for example, from Deputy Chair to Chair) where it is proposed to pay the office holder, in their new role, £150,000 per annum or above (even where the total remuneration package remains unchanged). The CST’s approval is not required where an individual’s remuneration moves to £150,000 or above following a standard pay award agreed by the Government. However, if an individual reaches the £150,000 threshold through the exercise of departmental discretion (other than through the implementation of such a pay award), approval is required.
1 See page 8 for application to part-time staff.
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What counts towards the £150,000 threshold? 3.5 For the purposes of deciding whether the pay level for a particular
appointment meets the threshold, pay should include all elements of salary, fees and allowances.
3.6 Any proposals to pay exceptional benefits must be identified in the pro-forma (detailed below) and will count towards the threshold.
3.7 For the purpose of this guidance ‘fringe benefits’ constitute an extra benefit supplementing an employee's fee or salary package. These should not normally be offered as part of the remuneration package, but where there is an exceptional proposal to provide them, they must count towards the threshold and be included in the business case. In accordance with the public sector pay and terms guidance2 private medical insurance and non-qualifying salary sacrifice arrangements must not be provided.
3.8 Taxable benefits, for example housing and travel allowances, should not normally be offered as part of the remuneration package unless there is a strong operational reason to do so. Normal reimbursement of receipted expenses actually and necessarily incurred in the course of official duties available to all staff does not count towards the threshold.
3.9 The cost to the employer of pensions in excess of normal levels (i.e. those not generally available to other members of the SCS or staff in the relevant organisation) should be calculated as the additional employer contribution required in respect of special terms not offered under the relevant pension scheme.
3.10 If the maximum payable under a performance payment arrangement exceeds £17,500, the excess should be added to the other elements of pay in order to assess whether the remuneration level for the appointment is £150,000 or over.
3.11 The contacts in Section 5 should be consulted if there is any doubt about what should be included.
Performance pay (‘bonuses’) 3.12 Approval of The CST is also required before any performance pay
arrangement worth over £17,500 is agreed.
3.13 All non-consolidated performance payments paid in respect of a performance year must be aggregated for the purposes of assessing whether a performance payment exceeds £17,500. The approval of the CST is required before entering into a commitment which might create a legal entitlement to a performance payment of more than £17,500 in a financial year.
2 https://www.gov.uk/government/publications/public-sector-pay-and-terms-guidance-note
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Application to part-time staff and pro-rata equivalent 3.14 In general the approval arrangements apply to those working part-time
(most public appointments and non-executives work part-time). But in such cases the threshold should be applied as follows:
• for the purpose of calculating a full-time equivalent salary, relevant employers should consider 260 days equivalent to the standard number of days worked in a calendar year and base relevant calculations on this figure
• if an individual is on an hourly rate then for the purpose of calculating a full-time equivalent salary employers should use the standard weekly hours for full-time employees undertaking a similar role in the organisation
• if an individual is to be paid for less than a day a week and is to receive less than £30,000, the requirement for CST approval does not apply
• if there is a change to the amount of days an individual works then the department must re-submit the role for approval, even if the day rate remains the same, in order to assess whether there is a case for increasing the resource
3.15 In the case of other part-time appointments, approval is required if the appointee is to be paid £150,000 or more pro rata (i.e. £30,000 p.a. or more for one day a week). For the purposes of referring performance payments for Treasury approval, similar provisions apply. For instance, if an individual works one day per week, Treasury approval would be required if it were proposed to make a performance payment of £3,500 or above.
Multiple appointments 3.16 Where an individual holds multiple public appointments, it is not necessary
to aggregate remuneration across all those appointments – unless the total time commitment involved reaches 5 days a week. It should be exceptional that any one individual holds such multiple appointments. However, where a department is proposing to consent to an arrangement which involves an individual holding multiple public appointments with a total time commitment of 5 days a week, they should calculate the remuneration involved across all those public appointments and seek approval from the CST if the total remuneration reaches or exceeds £150,000 per annum.
Tax and NICs assurance 3.17 In accordance with the recommendation in the CST review of the tax
arrangements of senior public appointments published in May 2012. Departments must ensure that tax and NICs will be deducted at source and confirm this in the pro forma.
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Chapter 4 The process for approval: all posts & appointments 4.1 Requests for approval for Civil Service and other NDPB Executive Posts must
be submitted to the Civil Service Workforce Policy and Reward team in the Cabinet Office.
4.2 For public appointments, requests for approval must be submitted to the Centre for Public Appointments
4.3 For organisations within the UKGI portfolio, requests for approval must in the first instance be submitted by the Company Secretary (or another equivalent person inside the public organisation) to one of two people:
• where UKGI’s agreed remit for the organisation covers the approval ofsenior pay and incentives, the relevant Director at UKGI; or
• where UKGI’s agreed remit for the organisation does not cover theapproval of senior pay and incentives, the relevant contact within thatpublic organisation’s parent department.
4.4 Contact should be made as soon as there appears to be a possibility that the reward package might reach or exceed the threshold, and CST approval should be obtained prior to advertising.
4.5 Departments should allow for a minimum of a three week approval turnaround following submission of the pro forma to Cabinet Office. In exceptional circumstances where an unexpected case needs an urgent decision, departments should engage immediately with the relevant team in Cabinet Office and the relevant Treasury officials.
4.6 It is important that submissions are constructed on a realistic basis, recognising any need for scope in negotiation with potential appointees. Where subsequent negotiations with the preferred candidate exceed the remit already agreed by the CST, a further application will need to be submitted before an appointment can be made.
4.7 As detailed below, it is important that the Accounting Officer approves the case before it is submitted. For arm’s length bodies or public organisations, it is also important that the responsible Minister and Permanent Secretary in the sponsoring department have approved the remuneration package.
4.8 The approval process operates as follows in the box below
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Box 4.A: Packages above £150,000 approval process
• organisation/department recognises the need to recruit/fill post (or toadjust or the contract)
• organisation/department engages with the relevant Cabinet Office team,engaging the relevant Treasury officials early on where appropriate
• for organisations within the UKGI portfolio, the nomination /remuneration committee gathers data and evidence on appropriatesalary and remuneration levels - if this points towards a figure of£150,000 or more (or pro-rata equivalent), they also informally consultUKGI or parent department as appropriate
• organisation/department gains approval of their accounting officer(usually the Permanent Secretary) and appointing Minister for theproposed package of £150,000 or more
• organisation/department formally submits their case to Cabinet Office orUKGI using the attached pro forma
• Cabinet Office/UKGI may liaise with the organisation/department toobtain further information on the justification for the proposed packageand seeks the view of the relevant Treasury officials
• Cabinet Office/UKGI submits the case to the Permanent Secretary to theTreasury for approval
• where appropriate, in parallel, the Cabinet Office seeks the views of theCabinet Secretary and the Chief Executive of the Civil Service
• Cabinet Office/UKGI submits the case
• The CST approves/rejects the proposed package. Cabinet Office/UKGIinforms the organisation/department and provides appropriate feedback
• Completion of recruitment process
• Organisation/department informs Cabinet Office/UKGI of the packageagreed with the successful candidate (within agreed remit
4.9 For Senior Civil Service (SCS) appointments, departments should notify the Cabinet Office of any proposal to offer non-standard terms. SCS posts with salaries of £150,000 or more will need to be cleared by Cabinet Office before they go to the CST.
4.10 If an existing post holder, currently paid below the threshold, is expected to receive remuneration above the threshold after receiving an increase in their pay package of more than 9%, for example following a change in the tax treatment of benefits or departmental expenses policy, then public sector employers must have the CST’s approval before engaging the individual or finalising policy changes. An example might be where a proposal is made to compensate for the tax liability that arises where detached duty allowance become taxable after 24 months.
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4.11 Appointing bodies should bear in mind throughout the recruitment process that authority to recruit to a certain salary level does not mean that the appointee must be paid that salary. The approved figure is the maximum that is permitted. Where the CST approves a negotiating range that allows departments to request further Treasury approval where an exceptional candidate is identified, this must not be advertised. Advertising this flexibility will constitute a breach.
Performance payments (‘bonuses’) in excess of £17,500 4.12 The process will be similar to that for approval for remuneration packages of
£150,000 and above. The process is set out in the box below.
Box 4.B: Performance payments (‘bonuses’) approval process
• a non-consolidated performance related payment (“bonus”) of morethan £17,500 is proposed, based on evaluation of performance againstobjectives and contractual terms (or a framework under which suchbonuses could be payable in the future)
• for UKGI appointments the remuneration committee submits proposedlevel of payment to the department or UKGI for approval. The case mustinclude a robust justification for the proposed level of bonus orpotential bonus and must be supported by the relevant sponsordepartmental Minister
• for non-UKGI appointments, the case is submitted to Cabinet Officeusing the attached pro forma. Note that the case must include a strongjustification for the proposed level of bonus and must be supported bythe relevant Minister
• Cabinet Office/UKGI may liaise with the department/organisation toobtain further information on the justification for the proposed packageand seek the view of the Treasury spending team
• Cabinet Office/UKGI submits the case to the Permanent Secretary to theTreasury for approval
• where appropriate, in parallel, the Cabinet Office seeks the views of theCabinet Secretary and the Chief Executive of the Civil Service
• Cabinet Office/UKGI put the case direct to the CST
• CST approves/rejects the proposed payment. Cabinet Office/UKGIinforms the organisation/department and provides appropriate feedback
• prior approval is required before entering into a contract which would(under any circumstances) confer a legal entitlement to a bonus above£17,500
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Breaches 4.13 Any breach of the control process may result in a deduction from the
departmental budget or an increase in spending controls. Breaches include the following, but this list is not exhaustive:
• appointing an individual or entering into any other potentially legally binding arrangement to pay a remuneration package in excess of the threshold without CST approval, or above the amount that was authorised
• either making an announcement of an appointment without a package agreed by the CST or in any way publicising an appointment – this should only happen if the CST has given explicit written agreement
• advertising a role with a remuneration package above the threshold without the CST’s approval, or advertising a role in excess of the amount that was approved by the Minister. If the CST agreed scope to offer a higher salary to exceptional candidates, this must not be advertised, and advertising this flexibility will constitute a breach.
4.14 Securing CST approval before going out to advertise offers the greatest opportunity to avoid delays and potential embarrassment when dealing with potential candidates. However, advertising for a post, without a specified remuneration package, is not in itself considered a breach of the controls process, particularly if the ambition is to appoint at a remuneration package lower than the threshold. However, a breach would occur if a department or organisation made any commitments concerning a remuneration package with candidates above the threshold, when they still had not received CST approval.
4.15 Financial sanctions for breaching this process are at the discretion of the CST, and sanctions are set at a maximum of five times the remuneration package of the individual(s) in question. When considering the severity of potential sanctions the CST may consider mitigating circumstances, the value of the remuneration package and previous compliance with pay controls. Departments are responsible for ensuring their sponsored organisations follow the correct process and will be sanctioned for their non-compliance.
4.16 Departments can expect the severity of the sanction to increase incrementally if continuous breaches occur.
Criteria for the assessment of cases 4.17 Although each case is assessed on an individual basis, the following criteria
are routinely applied to all senior pay cases as they undergo consideration and scrutiny. Departments should also apply these criteria and ensure their sponsored bodies are aware:
• influence and impact of role – this may be reflected in the size of the organisation. The business criticality of the role in terms of delivering government priorities is an important factor. For example, the need to generate income may attract higher pay, or a non-standard performance related pay arrangement linked to stretching and measurable targets. The
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level of accountability, the level of responsibility and risk to the role should also be considered when assessing the remuneration package
• the specialist nature of the role including the skills and experience required – higher pay may be needed to attract candidates from specialist markets. High calibre candidates with a proven track record may also be able to command a higher remuneration package. However, it should be clear that such skills are an essential requirement for the role.
• labour market considerations – for example, the labour pool from which the organisation is competing (internal/external markets) and specialist markets where a premium must be paid for niche skills. This may also be influenced by location issues (see benchmarking data below)
• relevant supporting benchmarking data – for example, data from independent organisations, Heads of Professions, search agencies and, for policy roles, internal Civil Service or public sector data. This may be split by regions to identify any location premiums. Departments should approach the Civil Service Employee Policy (CSEP) team in Cabinet Office for expert benchmarking information: [email protected].
• for more heavily weighted internal roles, any evidence underpinning job evaluation methods
• the package of the previous incumbent or any obvious comparators – for example, recent approvals or in cross-organisational terms. However, it is important to be aware that the previous incumbent salary provides a useful guideline and not a benchmark, given the specific circumstances that may have surrounded that appointment (e.g. they may have been appointed before the current controls were in place, or the scope of the role may have changed)
• biographical information – where applicable, review biographical information to assess the calibre and suitability of the candidate
• range of reward elements considered, including Pivotal Role Allowances.
4.18 These criteria should be considered alongside the three key principles detailed in Section 2.7.
Chapter 5
Contact Details
Senior Civil Service and other Senior Executive
Jo Needham, Duncan Everest
Civil Service Workforce Policy & Reward Cabinet Office
020 7271 2738, 020 7271 6347
Public Appointments and other Non-Executives
Katharine Purser
Centre for Public Appointments
Cabinet Office
020 7276 6227
Organisations within the UKGI portfolio
Laura Thompson
UK Government Investments Limited
HM Treasury
020 7215 4240
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Annex A Pro forma for salaries/remuneration at or above £150,000 p.a. Table 1.A: Pro forma for application for CST approval of salaries/remuneration at or above £150,000 per annum
Post
Employer or Appointing Authority
Name of Post Holder (if applicable)
Background
• please confirm that this application isbeing made before advertising and provide details of the proposed timetable.
• if the case is being reverted back to theCST following a recruitment exercise pleaseprovide details of the preferred candidateand attach their CV
• Please provide a brief description of therole including objectives and budgets thatthe role holder will be responsible for
• Please attach any job brief as supplied to(or intended for supply to) candidates
• Please include brief details about thepurpose and objectives of the employingorganisation. For UKGI organisations andtrading funds also include budget andturnover
Is this a new role? If not what is the value of the package of the former post holder?
Please provide details of proposed base salary or salary range. For public appointments this should include all proposed non-discretionary remuneration.
Taxable allowances and fringe benefits being proposed.
Proposed performance related pay arrangements.
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For any non-standard terms being proposed (in excess of £17,500) please provide details of objectives against which payment will be assessed and how they link with organisational objectives.
Please confirm that tax and NICS will be deducted at source
Proposed Pension Arrangements
Proposed negotiating flexibility on any of the above package elements
Type of Appointment (Fixed Term or Permanent). If a public appointment, specify the time-commitment and period of appointment
Justification for proposed package. This should include:
• Benchmarking data against suitable comparators in the wider public and private sector (of similar sector size & industry). Where private sector is used you should explain the particular skills and experience needed and the degree to which the employing organisation operates in competition with the private sector.
• To support recruitment and retention arguments, information on the employing organisation’s recent performance.
• For preferred candidates, details of their skills, experience and track record.
• For re-appointments, an assessment of the risk to delivery of the employing organisation’s objectives if the existing post holder is not retained. And the potential cost of advertising externally, including the package that would need to be offered.
Name of Permanent Secretary (for civil servants and public appointments) or Head of Remuneration Committee (for other public servants) supporting this application.
Views of Departmental Minister
Name and post of person submitting this application
Contact telephone and email
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Date of Application
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Annex B Pro forma for performance payments above £17,500 p.a.
Table 1.B: Pro forma for application for CST approval of salaries/remuneration at or above £150,000 per annum
Post
Name of Post Holder (if applicable)
Employer or Appointing Authority
Background
• Please provide a brief description of the role including objectives and budgets that the role holder will be responsible for.
• Please also include brief details about the purpose and objectives of the employing organisation
Level of payment (or range where a framework is proposed) and relevant performance year (i.e. the year for which the performance payment was earned). Include the date the payment will be made.
Post holder’s total remuneration for the relevant performance year including base pay and any other allowances, fringe benefits and special pension arrangements received.
Please confirm that tax and NICS will be deducted at source
Justification for proposed performance payment. Please include:
• How the individual’s personal objectives link to the objectives of the organisation, or relevant metrics where a framework is proposed, including detail on the link between key metrics and employing organisation’s objectives.
• Details of the individual objectives against which performance was/will be assessed
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and where appropriate the assessment of actual performance against each objective.
• Benchmarking data against suitable comparators in the wider public and private sector (of similar sector size & industry). Where private sector is used you should explain the particular skills and experience needed and the degree to which the employing organisation operates in competition with the private sector.
Details of any other performance payments made in respect to relevant performance year, with dates of payment.
Contractual terms (if any) of performance pay.
Name of Permanent Secretary (for civil servants and public appointments) or Head of Remuneration Committee (for other public servants) supporting this application.
View of Departmental Minister
Name and post of person submitting this application
Contact telephone and email
Date of application
HM Treasury contacts
This document can be downloaded from www.gov.uk
If you require this information in an alternative format or have general enquiries about HM Treasury and its work, contact:
Correspondence Team HM Treasury 1 Horse Guards Road London SW1A 2HQ
Tel: 020 7270 5000
E-mail: [email protected]
