NOT FOR PUBLICATION by virtue of paragraphs 1, 2 and 4 of Part 1 of
Schedule 12A to the Local Government Act 1972
HERTFORDSHIRE COUNTY COUNCIL
Part 2
Agenda item No.
EMPLOYMENT COMMITTEE
MONDAY, 3 MARCH 2014 AT 2.00 PM
1
REVIEW OF SENIOR MANAGER PAY STRUCTURE
Report of the Chief Executive and Director of Environment
Author: John Wood, Chief Executive and Director of Environment (Tel: 01992 555200)
1.
Purpose of report
1.1
To seek Members’ views on a finalised revised pay structure for Senior
Manager Pay (graded PMC and above).
2.
Summary
2.1
Employment Committee agreed on 1 July 2013 to a review of Senior Manager
Pay arrangements. External consultants, Mercer, were appointed to assist
with the review. In October 2013 Employment Committee were presented with
some principles for managing senior manager pay and agreed for Mercer to
undertake a job evaluation exercise to assess if the job sizing and pay for
each role was accurate.
2.2
The review has shown that overall most senior manager roles are correctly
graded.
2.3
At PMC level it is, however, recommended to split the grade into 3 zones.
This has resulted in some disparity between individual’s actual salaries and
the position of the role within a zone. It is not recommended that any
individual salaries are adjusted as a result of the new zones, but that the
analysis is used to help manage any future appointments or redesign of roles.
2.4
This report makes some further recommendations about managing the pay
structures. It recommends all senior managers be awarded a consolidated
cost of living increase each year based on an assessment of a number of
factors (e.g. market / affordability). Senior managers who achieve an Exceed
rating in their annual performance review will also be awarded a one off unconsolidated payment.
3.
Recommendations
3.1
1.
Employment Committee is recommended to agree the revised pay
structure for senior managers, as set out in the report.
2.
Employment Committee is recommended to agree that the following
be implemented from 1 April 2014:(i)
a cost of living award (value to be agreed annually by
Employment Committee), to be paid to all senior managers who
achieve an Fully Achieved or Exceed annual performance
rating;
(ii) all senior managers, i.e. those on Chief Officers / PMA / PMB /
PMC grades, a non consolidated payment (value to be agreed
annually by Employment Committee), to be paid to all managers
who achieve an Exceed annual performance rating;
(iii) three pay zones to be introduced into the PMC grade to help
differentiate between the evaluated values of the many Head of
Service roles with that pay grade; and
(iv) to make no adjustment to the current salaries of individuals
whose job may have been evaluated higher or lower than their
current grade, or PMC zone. However, in future job evaluation
information will inform pay at the point of recruitment or where
roles are significantly changed due to job and service re-designs
or restructures.
4.
Background
4.1
Hertfordshire County Council current employs approximately 110 ‘senior
managers’ on locally agreed terms and conditions. These managers are
employed across 4 broad salary bands. The pay bands of 13/14 are set out in
Table 1 below.
Table 1
4.2
Grade
Job Title
Pay Band
Chief Officer
PMA
PMB
PMC
Director
Deputy Director/ Deputy Chief Fire Officer
Assistant Director / Assistant Chief Fire Officer
Head of Service
£116,150 - £156,843
£102,303 - £115,701
£75,013 - £103,177
£50,187 - £70,887
Senior Managers are currently awarded individual performance pay increases
related to their performance against individual objectives and the overall rating
agreed at the end of each year. Employment Committee annually decides on
cost of living increases and whether any performance award should be paid
(including a decision on the value of that award and whether it should be
consolidated into pay) in respect of Chief Officers; and also makes
recommendations to the Chief Executive in respect of those staff graded PMC
- PMA.
4.3
Historically a matrix approach was used where a percentage increase was
applied and consolidated into managers pay. The percentage increase
depended on position in the pay band as well as the annual performance
rating awarded (Not Met, Partly Met, Fully Achieved (previously Met) or
Exceed). The recent economic pressures have resulted in the matrix not
being used, leading to differences year on year in the management of pay.
This has resulted in applying a complete pay freeze in 2009 /10 and paying a
one off, set value, non consolidated payment to those employees that
achieved an Exceed rating only in 2011 / 12. It is this annual variation in
practice and the uncertainty that this brings, that the review partly seeks to
address.
4.4
Over the past few years, the Council has reduced Senior and Middle Manager
positions by 30%, which has resulted in a greater breadth and scope of
service delivery for many of those remaining. There are now increased spans
of control and fewer layers, with services moving towards different models of
delivery through a more flexible workforce.
4.5
The current senior manager pay scheme was designed in the late 1990s it
has become evident that:
4.6

The scheme was not being operated as it was intended when first
designed, e.g. cost of living awards frozen and fixed value payments made
rather than pay differentiated by position in grade.

There was no visible link between pay and performance for Senior
Managers.

The current pay system was not ‘fit for the future’ and provided limited
ability to vary pay (positively or negatively) to reflect organisational and/or
individual performance.

Senior Managers did not have up-to-date job descriptions, making
assessment of relative pay levels problematic.
In light of the above, Employment Committee agreed on 1 July 2013 to a
review of Senior Manager Pay arrangements. The objectives of the review,
agreed by the Committee in July 2013, were to:

Refresh the link between pay and performance at PMC to Chief Officer
level.

Ensure Senior Managers are paid at the correct level dependent on job
size and responsibilities.

Increase the flexibility of pay arrangements enabling the Council to
respond to emerging market pressures.
4.7

Ensure that the Council’s pay arrangements are fit for the future and able
to reward in the context of emerging service delivery models.

Use the new pay arrangements to drive the successful delivery of the next
phase of Council for the Future.

Ensure the new scheme is operated on a fair and transparent basis to
avoid the risk of any challenges (e.g. equal pay).

Ensure the new scheme has the flexibility to operate within the current,
constrained cash envelope.
Following agreement from Employment Committee on 1 July 2013, external
consultants, Mercer, were appointed to review and develop options for
changes to the senior manager pay structure. Employment Committee, in
October 2013, agreed the following additional objectives suggested by
Mercers:

To present clear differences between the required levels of contribution in
the Senior Manager population (particularly those on PMC grade) so
managers are clear about pay equivalency.

To explain clearly to senior managers (and those within the succession
pipeline for those positions) how their pay is structured and what they can
do to influence the way their pay moves over time.

To ensure that the Council receives maximum return on its investment in
pay and is able to identify and resolve any anomalies where individuals
are under or over paid. Over time this may result in savings being
identified from the senior manager pay bill.

To achieve greater clarity on the Council’s position against the market in
terms of pay levels, to aid recruitment and retention.

To integrate talent management and reward as part of one process, with
reward used to recognise performance, and investment in development
and career progression opportunities used to recognise future potential.

To future proof the pay and reward approach for senior managers for at
least the next 5 years.

To identify any implementation costs and consider how these might best
be managed to minimise pressure on the existing cash envelope (i.e. total
pay bill) for senior managers.
5.
The Review
5.1
On 9 October 2013 Employment Committee considered potential models for
the future of senior manager pay structure (see Appendix 1 from the October
Employment Committee Report). The Committee agreed that all senior
manager jobs should be evaluated using the Hay job evaluation methodology
and that the results of the evaluation be reported back to the Committee in
due course.
5.2
The recommended proposals presented to the Committee in October 2013
are set out in paragraphs 5.3 and 5.4 below. Where changes have been
made to the original proposals following further discussion with Mercer, these
are set out in bold.
5.3
Chief Officers, PMA and PMB (Directors, Assistant Directors & Deputy
Directors)

Remove the current salary ranges for the top 3 levels and replace with
spot salaries.

These salaries will be informed by the market, the evaluated level of the
job and the relative skills and experience of the incumbent. These may be
varied at the point of recruitment based on the market or if there is a
significant change to the role.

Current employees will be transferred to the new spot salary
arrangement based on current salary level, unless there is a clear
case to review the salary. Any anomalies with pay will be resolved via
future recruitment activities or restructures.

Cost of living award each year for those rated ‘Fully Achieved’ and above
based on the same factors as currently used (i.e. affordability, inflation and
with reference to the national public sector pay position) and consolidated
into pay.

Performance recognised through annual non consolidated performance
increase based on performance rating. The non consolidated increase will
be offered to those rated ‘Exceed’ only.

Opportunity to offer a non contractual or contractual market supplement
based on evaluation of private/public sector markets (or a blend of the two)
where there is significant market pressure on pay.
5.4
5.5
PMC (Heads of Service)

PMC will remain as one grade but with three new pay zones to set
clear expectations on relative role contribution and manage
expectations about maximum pay levels for each role within the
allocated zone.

All new roles will be allocated a pay zone, which will indicate the
base pay for that role and also the post holders’ maximum salary
potential. Progression through the zone or exceptionally to the next
zone will be dependent on additional responsibility or market
pressures.

Current employees will be informed of the zone and/or grade for their
job based on the role outline provided, but no immediate pay
adjustment will be made to employees in the wrong zone or grade.
Pay will be realigned (if necessary) over time via restructures, job
changes or new appointments.

Cost of living award each year for those rated ‘Fully Achieved’ and
‘Exceed’ based on current factors (as 5.3) and consolidated into pay.

Performance recognised through an annual non consolidated performance
increase. The non consolidated payment will be offered to those rated
‘Exceed’ only.

The opportunity to offer a non contractual or contractual market
supplement based on evaluation of private/public sector markets (or a
blend of the two) where there is significant market pressure on pay.
This is summarised as follows;
Grade
Core pay
Chief
Officers;
Spot salary
determined by:
PMA
(Deputy
Directors);
 the general
market
PMB
(Assistant
Directors)
 evaluated
level/size of the
job
 skills and
experience of
post holder
PMC
(Heads of
Salary within
broad band and
Cost of living
increase
Assessed
annually based on
affordability,
inflation, national
pay policy, etc.
Only payable to
those with ratings
of Fully Achieved
or Exceed.
Individual
performance pay
Assessed annually
based on
individual
performance review
rating Exceed.
Not consolidated
into base pay – one
off lump sum
Market pay
Assessed
against the
‘market’ for the
specific role and
recruitment or
retention issues.
Contractual or
non contractual
market forces
element that is
identifiable and
Service)
subsidiary three
zones to:
Consolidated into
base pay
payment.
 Spot salary in
the zone
 Set clear
expectations on
relative role
contribution
separate from
base pay.
Paid as a
regular payment
or one off lump
sum in arrears
 Manage
expectations
about maximum
pay for the role.
6.
The Evaluation Process
6.1
The evaluation exercise was used to test the robustness of the Council’s use
of the HAY job evaluation methodology as a mechanism for setting pay. As
part of the evaluation, Senior Managers were each asked to complete a role
outline, which was used to: 
Assess whether the proposed revised pay structure was feasible in
practice

Evaluate the current role and assess relative contribution in line with pay
for the role using HAY Job evaluation methodology as well as a second
review by Mercer using their own tool.

Provide a target salary for each role based on the evaluation

Produce a contributions matrix outlining what is expected at each grade so
that managers are clear on pay equivalency. The Matrix takes account of
job evaluation assessment, impact, stakeholder management, complexity
and people and knowledge.
6.2
The evaluation process was based solely on the job outlines provided by
individuals and agreed by their line manager and did not include analysis of
external factors that may also influence pay levels (i.e. the market, length of
service). As might be expected, the exercise did reveal a number of posts
currently underpaid and also overpaid if the evaluation is used as an absolute
baseline. It is considered though that, whilst the exercise forms a basis to
discuss and assess the market in these areas, it is not grounds on its own to
make any individual adjustments to pay. Individual positions will be discussed
through line managers.
6.3
The outcomes of the evaluations enables the Council to meet the stated
objectives of being able to identify clear differences between the required
level of contribution in the Senior Manager population (particularly those on
PMC grade) and also to check that, in the future, Senior Managers are paid at
the correct level dependent on job size and responsibilities. It has also
enabled the Council to develop a contribution matrix, which will be shared with
managers as part of the outcomes of this review.
7.
Communication of the Review Outcomes
7.1
Following the outcome of Employment Committee the following will be shared
with Senior Managers:




Arrangements for future cost of living awards
Arrangements for future performance pay awards
The contribution matrix
The evaluated grade and/or baseline for their job (via each Director)
7.2
No changes to individual contractual changes are required for existing senior
managers so no formal consultation process is planned. Two briefings
explaining the changes are scheduled for 6th and 17th March 2014, to be
delivered by the Chief Executive.
8.
Benefits of the Review
8.1
Endorsement of the proposed new pay arrangements will result in the
following benefits:
A more transparent pay review structure for PMC and above managers.

A clear contribution matrix for all PMC and above roles, outlining what is
expected at each grade, which will help to manage pay expectations.

A clear understanding of how pay is structured and how managers can
influence their pay over time.

A complete set of job descriptions for the Senior Manager community,
outlining the current job size and recommended salary for each role. This
will in turn enable each role to be accurately benchmarked against the
market and will need to be maintained as roles change in future.
9.
Equalities Implications
9.1
When considering proposals placed before Members it is important that they
are fully aware of, and have themselves rigorously considered the Equality
implications of the decision that they are making.
9.2
Rigorous consideration will ensure that proper appreciation of any potential
impact of that decision on the County Council’s statutory obligations under the
Public Sector Equality Duty. As a minimum this requires decision makers to
read and carefully consider the content of any Equalities Impact Assessment
(EQiA) produced by officers.
9.3
The Equality Act 2010 requires the County Council when exercising its
functions to have due regard to the need to (a) eliminate discrimination,
harassment, victimisation and other conduct prohibited under the Act; (b)
advance equality of opportunity between persons who share a relevant
protected characteristic and persons who do not share it and (c) foster good
relations between persons who share a relevant protected characteristic and
persons who do not share it. The protected characteristics under the Equality
Act 2010 are age; disability; gender reassignment; marriage and civil
partnership; pregnancy and maternity; race; religion and belief, sex and
sexual orientation.
9.4
If Members were to accept the recommendations detailed within this report
further analysis would be undertaken in relation to the Equality Issues flowing
from this decision by way of an Equality Impact Assessment (EQiA). Initial
analysis indicates that there is no adverse impact for groups with protected
characteristics.
10.
Financial Implications
10.1
There are no immediate financial implications of the recommendations as it is
not recommended at this stage to change any individual salaries. Financial
implications of the annual changes to pay in regard to cost of living and any
performance payments will be set out and assessed annually by Employment
Committee.