PUBLIC SECTOR PAY POLICY FOR SENIOR APPOINTMENTS

Transcription

1 PUBLIC SECTOR PAY POLICY FOR SENIOR APPOINTMENTS TECHNICAL GUIDE for the remuneration of CHIEF EXECUTIVES (of NDPBs and Public Corporations) NHS Executives (Grades D to I) CHAIRS & MEMBERS November 2013

2 CONTENTS Page 1. INTRODUCTION... 3 Background... 3 When is approval required?... 4 What are the respective roles and responsibilities in the approval process?... 4 When should proposals be submitted for approval?... 6 What form should proposals take?... 6 Where should you send your proposals?... 6 What are the contact details for the Finance Pay Policy team? KEY PAY POLICY PARAMETERS FOR What are the pay policy parameters for Chief Executives in ?... 7 Is there any provision for multi-year deals for Chief Executives?... 7 What are the arrangements for non-consolidated performance payments (bonuses) for Chief Executives?... 8 What about offering any commitment to No Compulsory Redundancy?... 8 What are the pay policy parameters for Chairs and Members? CHIEF EXECUTIVES: FRAMEWORK... 9 Who is it for?... 9 What is the Scottish Chief Executive Pay Framework?... 9 What needs to be taken into account when developing a remuneration package for a Chief Executive? What other factors must you consider when setting the salary? What about other elements of the wider remuneration package? What other factors must be considered? What should the business case contain when a review or new post is being proposed? What about temporary Chief Executives? What to do if you want to vary a new remuneration package after it has been approved? Do you have to seek approval for the terms in a new contract? How is a Chief Executive to be paid? What to do if a Chief Executive is considering a public appointment or Non-Executive Directorship? CHIEF EXECUTIVES: APPROVAL What must you do to seek approval of proposals? How is the Scottish Government going to assess your proposals? Who is going to approve your remuneration proposals? How long should any approval take? What might happen if the Pay Policy for Senior Appointments is not followed? CHAIRS AND MEMBERS: FRAMEWORK Who is it for? What is the background to the policy for Chairs and Members? What is a daily fee and what is it for? What is the Daily Fee Framework? How to determine the daily fee of a Chair or Member of a public body?. 27 What should a business case contain?

3 What to do if differences in daily fee rates between Members arise? What about offering a pension? How are Chairs and Members to be paid? What about expenses? What about other tax matters? What to do when making a public appointment where the individual is already a senior employee of another public body? CHAIRS AND MEMBERS: APPROVAL What must you do to seek approval of proposals? How is the Scottish Government going to assess your proposals? Who is going to approve your daily fee proposals? What might happen if the Pay Policy for Senior Appointments is not followed? How long should the process take? GLOSSARY ABBREVIATIONS CHIEF EXECUTIVE PAY & DAILY FEE FRAMEWORKS A QUICK REFERENCE

4 1. INTRODUCTION Background 1.1 The Scottish Government s Public Sector Pay Policy for Senior Appointments , published on 11 September 2013, sets out the Scottish Government s pay policy on the remuneration of senior appointments to a wide range of Scottish public bodies for the period and This Technical Guide supports the Pay Policy for Senior Appointments and sets out the procedures which must be followed and the approval process for remuneration proposals relating to: Chief Executives 1 of Non-Departmental Public Bodies (NDPBs) and Public Corporations (in respect of any proposed changes to: salary, pay range, non-consolidated performance payment (bonus) and other non-salary rewards, etc.) NHS Scotland Executive and Senior Management posts in Grades D to I only - referred to in this policy as NHS Executives. This group of staff has significantly different governance arrangements from other staff covered by the policy and is covered in respect of a collective pay proposal only: individual appointments, remuneration and terms and conditions are made in line with the Scottish Government s health policy The daily fees paid to all public appointments (Chairs and Members) to Scottish public bodies; Non-Executive Directors of the Scottish Government and its Agencies and Associated Departments; Chairs and Board Members of NHS Bodies; appointments to Tribunals, Appeals Boards, Advisory Committees and Inquiries, and ad hoc working groups, etc. under the auspices of the Scottish Ministers (in respect of any proposed changes to: daily fee rates; annual uplifts and reviews; and any pension arrangements, etc.) 1.2 The pay of staff: below Senior Civil Service level in the Scottish Government, its Agencies and Associated Departments; below Chief Executive level in NDPBs and Public Corporations; NHS Scotland Executive and Senior Management posts (Grades A to C inclusive); is expected to be covered by the staff pay remit, which is subject to the Scottish Government s annual Pay Policy for Staff Pay Remits and available at: 1 The Chief Executives of David MacBrayne Ltd., Quality Meat Scotland and the Scottish Futures Trust are not covered by this policy, although the Chairs and Members of those bodies are. This pay policy also covers the Chief Executive and Directors of Scottish Water insofar as the Board are expected to follow the principles of the pay policy, except in relation to non-consolidated performance related payments. Such payments are only made if Scottish Water outperforms the demanding efficiency targets that are set by its independent economic regulator. 3

5 When is approval required? 1.3 Scottish Government approval is required in relation to all aspects of the remuneration of senior appointments (annual increases; or before the creation of any new post or appointment; and before implementing any change to the remuneration of Chief Executives, Chairs or Members). What are the respective roles and responsibilities in the approval process? 1.4 The roles and responsibilities of the various parties involved in the approval process for persons covered by this Technical Guide are as follows: Chair / Board (of public body) Must comply with the Pay Policy for Senior Appointments Must ensure the public body s Remuneration Committee (where applicable) is aware of and complies with the Pay Policy for Senior Appointments When necessary, develop remuneration proposals for their Chief Executive on any new or reviewed remuneration package (salary, pay range, progression including (where appropriate) any non-consolidated performance payment (bonus) arrangements, non-salary rewards, etc.) which comply with the Pay Policy for Senior Appointments and ensure Scottish Government approval is obtained prior to advertising, agreeing or implementing such proposals Submits proposals for Scottish Government approval to the Finance Pay Policy team, copied to the relevant Sponsor Team Sponsor Team (Scottish Government) Must comply with the Pay Policy for Senior Appointments Must ensure every public body they sponsor is aware of the Pay Policy for Senior Appointments. It is particularly important if a new Chair is appointed the Sponsor Team informs them of the Pay Policy for Senior Appointments and provides them with the latest copy Along with the Finance Pay Policy team, considers remuneration proposals Submits any proposals to uplift, introduce or review daily fees payable to Chairs and Members of public bodies they sponsor to the Finance Pay Policy team Considers and confirms the affordability and sustainability of all remuneration proposals, in conjunction with the relevant Finance Business Partner Having confirmed the affordability and sustainability of the remuneration proposals, seeks formal approval for the proposals 4

6 Sponsor Director (Scottish Government) Must ensure every public body they sponsor is aware of the Pay Policy for Senior Appointments Encourage timely submission of proposals and liaise, where necessary, with the sponsor body when any delay becomes apparent For new or reviewed remuneration proposals, seeks Remuneration Group s approval With the Director of Financial Strategy (the Senior Officials), considers and approves relevant proposals under the delegated approval arrangements (or refers them to the Remuneration Group) Finance Business Partner (Scottish Government) Considers and provides comment to Sponsor Teams on the affordability and sustainability of remuneration proposals Finance Pay Policy team (Scottish Government) Provides advice to public bodies; Sponsor Teams and Sponsor Directors; the Remuneration Group; and relevant Ministers on the Pay Policy for Senior Appointments Rates proposals against the Pay Policy for Senior Appointments (and provides feedback on why such a rating was given); provides advice to the Director for Financial Strategy and the Remuneration Group Remuneration Group (Scottish Government) Chaired by a non-executive member of the Scottish Government s Strategic Board and meets regularly throughout the year. Details of membership, meetings and the deadlines for papers are set out on the Scottish Government s Public Sector Pay webpages: Considers and approves any significant new or reviewed remuneration proposals for Chief Executives, Chairs and Members or refers proposals and provides advice to Ministers for approval Also considers governance issues in relation to remuneration for public bodies covered by this policy. Remit includes making sure a consistent approach is taken to approval of pay remits for both staff and senior appointments 5

7 Relevant Portfolio Minister and Cabinet Secretary for Finance, Employment and Sustainable Growth Jointly consider and make decisions on remuneration proposals for Chief Executives, Chairs and Members referred to them by the Remuneration Group If Ministerial approval is required, submissions must be sent to the relevant portfolio Minister and the Cabinet Secretary for Finance, Employment and Sustainable Growth When should proposals be submitted for approval? 1.5 Any proposals should be submitted as soon as is practicable; within or in advance of the financial year to which they relate; or, where applicable, prior to any advertisement. Sufficient time for approval should be allowed. What form should proposals take? 1.6 If proposals are simply an uplift in line with policy, then the respective template for Chief Executives or Chairs and Members is all that is required to be submitted. If, however, proposals entail a change in remuneration (for example, following a review) or remuneration relating to a new appointment, then they should include a business case from the public body and will require consideration by the Scottish Government Remuneration Group. Where should you send your proposals? 1.7 Proposals for approval should be submitted initially to the Finance Pay Policy team and where relevant, copied to the appropriate Sponsor Team. What are the contact details for the Finance Pay Policy team? 1.8 The Finance Pay Policy team is happy to provide advice and assistance and will provide feedback on proposals once submitted for approval. They can also help in making sure any supporting business case includes all of the necessary information prior to submitting proposals. Geoff Owenson Lesley Doherty Neil Ramage Website: Address: financepaypolicy@scotland.gsi.gov.uk Finance Pay Policy The Scottish Government Area 3B-south Victoria Quay EDINBURGH EH6 6QQ 6

8 2. KEY PAY POLICY PARAMETERS FOR What are the pay policy parameters for Chief Executives in ? 2.1 There is a 1 per cent cap on the Basic Award. 2.2 For Chief Executives on pay ranges, there is discretion for individual employers to reach their own decisions about pay progression, where eligible, but this is limited to a maximum of 1.5 per cent. 2.3 In calculating any award, the expectation is that progression, where eligible, will be considered first then any Basic Award can be applied. The level of Basic Award should take into account the levels of Basic Award proposed for other senior members of staff within the public body. 2.4 Any increase in pay must not exceed the maximum of the Chief Executive s pay range nor must it exceed the ceiling of the relevant Band in the Chief Executive Pay Framework. There is no provision for any non-consolidated payments for those at the maximum of their pay range. 2.5 In relation to NHS Scotland Executives, the Basic Award will be based on a maximum 1 per cent of the total salaries for those staff covered by this Pay Policy. Is there any provision for multi-year deals for Chief Executives? 2.6 The Pay Policy for Senior Appointments is a two-year pay policy. There is an expectation that Chief Executive pay proposals will cover two years, although this is not a mandatory requirement of the policy. It will be for the body to decide whether to submit a one or two-year remuneration proposal and how the award may be packaged taking into account the specific circumstances, but the average annual increase must not exceed the parameters set out in the Pay Policy. A public body may submit proposals that front or back-load the proposed pay award (i.e. proposals apply an increase which results in the basic salary increasing by more than 1 per cent in one year off-set by an increase of less than 1 per cent in the other year), provided this does not result in an increase of more than the compounded equivalent of applying 1 per cent plus 1 per cent over the two-year period covered by the proposals. 2.7 However, any proposal to increase basic salary by more than 1 per cent in any year must be to address evidenced recruitment or retention issues, must have regard to what other senior staff are receiving in the body are receiving and whether proposals for front or back-loading are being proposed for staff in the pay remit. Detail of the issues and supporting evidence will need to be set out in the supporting business case, including evidence demonstrating affordability and sustainability of the proposals. 7

9 What are the arrangements for non-consolidated performance payments (bonuses) for Chief Executives? 2.8 The suspension of non-consolidated performance payments (bonuses) continues during and The policy position remains that, during a period of continued financial restraint, all non-consolidated performance payments remain suspended. This approach allows public bodies to maximise the resources available to them to address low pay and fair pay issues.. What about offering any commitment to No Compulsory Redundancy? 2.9 The Chief Executive may be offered a commitment to No Compulsory Redundancy where this is also offered to staff in the body. What are the pay policy parameters for Chairs and Members? 2.10 A 1 per cent cap also applies to the daily fees for Chairs and Members of Scottish public bodies The Daily Fee Framework for and is set out in full in section There is an expectation that daily fee pay proposals for Chairs and Members will cover two years, although this is not a mandatory requirement of the policy. In such circumstances, the public body would require to demonstrate their overall proposals were within the parameters set by the Pay Policy and were affordable within the envelope of their agreed spending review allocations Where a Chair or Member is already paid a daily fee in whole pound amounts, the proposed daily fee may be rounded (under standard accountancy practices) to the nearest whole pound. Where such rounding results in an increase in a daily fee of less than 1 per cent, then the post may move to being paid daily fees on the basis of pounds and pence No daily fee (including any pension contribution) should exceed the ceiling in the Daily Fee Framework, except where the daily fees were agreed previously by Ministers at levels above the ceiling. 1 Where the financial settlement has not yet been agreed, the public body will be required to demonstrate the cost of their proposals can be delivered within their provisional financial settlement. 8

10 3. CHIEF EXECUTIVES: FRAMEWORK Who is it for? 3.1 Sections 3 and 4 of this Technical Guide apply to Chief Executives and, in exceptional circumstances (and only with prior approval), Directors who are not covered by the public body s pay remit. Any proposals to appoint a temporary or interim Chief Executive is also subject to this policy (see sections 3.47 to 3.51). 3.2 Approval will also be required if any changes to a public body s staff handbook are being proposed which will have the effect of amending or revising any aspect of those elements of a Chief Executive s reward package covered by the Pay Policy for Senior Appointments 3.3 This Section also applies to the appointment of a Chief Executive to new public body; the appointment of a new Chief Executive to an existing body; and when a review of an existing Chief Executive s remuneration package is being undertaken (including, for example, the introduction of or changes to non-pay rewards, such as a car, etc. or revisions to pension arrangements where these are not mandatory). 3.4 While it is normally good practice to review the remuneration arrangements on a regular basis, the Scottish Government would not expect a review of the Chief Executive s remuneration package to be undertaken unless there has been a significant increase in the role and responsibility of the post. 3.5 The fact that a Chief Executive may have reached the maximum of the existing pay range or has fallen behind the market is not sufficient justification to review the pay range. Nor should the existing remuneration be used solely as the basis for establishing the new minimum of a proposed pay range. 3.6 The extent to which an appointment requires Ministerial approval is dependent on the legislative arrangements for that particular public body. However, in all cases, Scottish Government approval of the proposed remuneration package is required before the post is advertised; contracts agreed; or the appointment is made. Potential remuneration packages should not be discussed with prospective candidates until Scottish Government approval has been given. What is the Scottish Chief Executive Pay Framework? 3.7 In order to ensure consistency and fairness between the remuneration of senior staff employed in Scottish Government Agencies and Associated Departments, who are civil servants (and members of the Senior Civil Service) and that for Chief Executives in public bodies covered by the Pay Policy for Senior Appointments, the salary and pay range of a Chief Executive must lie within the Scottish Chief Executive Pay Framework. Whilst there is a read-across between the Scottish Chief Executive Pay Framework and the 9

11 Senior Civil Service Pay Framework, Chief Executives of NDPBs and Public Corporations are not civil servants and are neither subject to the Senior Civil Service Pay Framework nor its operation. 3.8 The Scottish Chief Executive Pay Framework is uplifted by 1 per cent in each year of the Pay Policy as follows: Scottish Chief Executive Pay Framework (base pay) Pay Band Minimum Maximum Ceiling 3 102, , , , , ,125 1A 68, , , ,782 90, ,928 Scottish Chief Executive Pay Framework (base pay) Pay Band Minimum Maximum Ceiling 3 103, , , , , ,766 1A 68, , , ,370 91, , The Scottish Chief Executive Pay Framework operates on the basis of base pay with salary and pay ranges excluding any non-consolidated performance payment (bonus), pension and the cash value of any non-salary rewards. Some evaluation systems also refer to total cash reward which might include a non-consolidated performance payment or bonus, pension and the cash value of any other non-salary rewards, but this should not be used in determining the market median for this purpose. However, the business case may make the case to take into account differences in pension contributions, etc. if this was considered relevant The salary and pay range of a Chief Executive is expected to lie within the minimum and maximum of the relevant Pay Band in the Scottish Chief Executive Pay Framework. The business case in support of proposals must include clear and convincing market evidence to support the proposed pay range. In exceptional circumstances and where there is robust market evidence, the business case can include proposals for a maximum which extends beyond the maximum in the relevant Pay Band. In all cases, the proposed pay range maximum must be within the ceiling of the relevant Pay Band within the Scottish Chief Executive Pay Framework and is expected to remain so The pay policy expectation is that a Chief Executive should be remunerated by way of a pay range (allowing individuals to progress, through performance and experience, towards the maximum of the pay range which should reflect the market rate for the job), with progression linked to performance through the delivery of agreed objectives. This is principally for two reasons. First, it provides that annual pay rises are, in part, based on performance; and secondly, allows for a Chief Executive to progress towards the maximum of their pay range (the market rate for the job) over time, as they increase their knowledge and experience of the role. Only in exceptional 10

12 circumstances would the appointment of a new Chief Executive on a spot rate be considered for approval (which reflects the market rate for the job). What needs to be taken into account when developing a remuneration package for a Chief Executive? 3.12 The following sections are relevant where a new Chief Executive post is being created or where a review is being undertaken for an existing Chief Executive post (whether a change of incumbent or not) There are a number of factors to consider as part of a remuneration package for a Chief Executive and further details are covered later in this section, but the first steps entail: Determining the Pay Band in the Scottish Chief Executive Pay Framework Identification of the relevant labour market (to determine the range maximum and setting of the pay range) Determining the Pay Band in the Framework 3.14 In order to determine the appropriate Pay Band in the Scottish Chief Executive Pay Framework you need to establish the weight of the Chief Executive post. A formal job evaluation of the role and responsibilities of the Chief Executive post should be undertaken. The outcome of the job evaluation should result in a score which will inform into which Pay Band in the Scottish Chief Executive Pay Framework the post might sit Normally, the job evaluation will be carried out by the public body, though where this is not possible the Scottish Government may be able to assist. In such circumstances, advice should be sought from the Finance Pay Policy team The Finance Pay Policy team must be consulted in determining the identification of the appropriate Pay Band. Note: it is not the proposed salary, proposed pay range or current Banding of the body (in relation to the Chair and Members Daily Fee Framework) that determines the Chief Executive s Pay Band in the Scottish Chief Executive Pay Framework, but the evaluation of the role and responsibility of the Chief Executive post. Identification of the relevant labour market (to determine the range maximum and setting of the pay range) 3.17 Normally this would be the Scottish public sector labour market which includes Scottish public body Chief Executives in the same Pay Band. The Finance Pay Policy team can provide a list of comparable Chief Executives of Scottish public bodies and remuneration information Public bodies may provide additional evidence where the labour market, from which the Chief Executive might be recruited, is wider in scope 11

13 than the Scottish public sector labour market. In such circumstances, a public body must explain the appropriateness and relevance of that market data. Market comparisons should be made on the basis of similarly weighted posts. Before gathering such information, public bodies should discuss the scope of the proposed labour market with the Finance Pay Policy team The pay policy expectation is that the maximum of the proposed pay range should be no greater than the median of base pay of similarly weighted posts in the relevant labour market The public body should then develop proposals for a pay range for the Chief Executive within the relevant Pay Band. In doing so, public bodies should take into account the Scottish Chief Executive Pay Framework. The pay policy expectation is that the proposed pay range for the Chief Executive should lie within the minimum and maximum parameters of the relevant Pay Band in the Scottish Chief Executive Pay Framework and not simply be the minimum and maximum of that Pay Band in the Framework Where the proposed pay range maximum is above the maximum of the relevant Pay Band in the Scottish Chief Executive Pay Framework, the business case will need to set out the case for offering remuneration at such a level and this must be supported by market evidence, including a note of any recruitment and retention aspects. The proposed pay range should not exceed the ceiling of the relevant Pay Band in the Framework. The method of progression 3.22 As the Pay Policy for Senior Appointments is a two-year policy, progression cannot be guaranteed beyond the term of the current policy. When developing remuneration proposals therefore, it should be noted that no commitment to levels of future annual increases (Basic Award or progression) should be given as these are not guaranteed - any annual increases will remain subject to the Pay Policy for Senior Appointments in place at that time and will require Scottish Government approval No contractual obligation or expectation to annual increases should be created nor implied: spine points should not be a feature of any pay range as progression to such points cannot be guaranteed. Public bodies must ensure any contractual documentation is clear in this regard and the Finance Pay Policy team must be consulted on the remuneration clauses in draft contracts or letters of appointment (see section 3.53) A public body must outline the approach to progression and journey time anticipated in determining the proposed pay range and demonstrate how this is affordable and sustainable in future. Internal referencing with the public body s senior management team 3.25 When developing pay range proposals, the public body must consider the relationship and pay differentials between the remuneration of the Chief 12

14 Executive and members of the senior management team (or the most senior level of Director below the Chief Executive). Equalities legislation 3.26 Public bodies must take into account their obligations under equalities legislation when determining a pay range for the Chief Executive and must include written confirmation of this when submitting any proposals for approval. What other factors must you consider when setting the salary? 3.27 A public body must indicate the anticipated starting salary. The starting salary may be at any level between the minimum and 25 per cent (the lowest quartile) of the approved pay range. If the proposed starting salary is beyond the lowest quartile then the public body should set out in its business case the proposed salary and why such a salary is considered necessary Where a review is being proposed for an incumbent Chief Executive, the assimilation point on the proposed pay range should take into account the skills and experience gained by that Chief Executive in the current post from the date of appointment to the present time or since the point where there was a significant change in the role and responsibility of that post. The requirement to achieve a 10 per cent reduction in the remuneration package 3.29 Since 2010, the Pay Policy for Senior Appointments has included the expectation that the remuneration of a new Chief Executive appointment will be at least 10 per cent lower than that of the outgoing Chief Executive. This expectation is predicated on the ability to fill the post with a suitable candidate and so should have regard to external market levels, value for money and recruitment and retention issues The whole remuneration package (salary, pay range, non-consolidated performance payment and any other non-salary rewards) should be considered as part of this expectation. Some of this reduction may be achieved simply by appointing a new Chief Executive on a salary less than that of the outgoing There may be a case to apply a lesser reduction where there is evidence the role of the Chief Executive post has increased significantly; where the post was reviewed recently; or where the outgoing Chief Executive had only been in post for a short period of time. Such issues should be discussed with the Finance Pay Policy team in the first instance The business case and submission to the Remuneration Group must clearly set out how this reduction is to be achieved or why a lesser reduction is being sought. 13

15 What about other elements of the wider remuneration package? Non-consolidated performance payments (bonuses) 3.33 All non-consolidated performance payments continue to be suspended in and In addition, there is a presumption against provision for non-consolidated performance payments in any new Chief Executive contracts or following a review However, in general, a non-consolidated performance payment (bonus) is not consolidated into pay and is non-pensionable. The maximum potential non-consolidated performance payment (no more than 10 per cent of base salary) of any current Chief Executive will be that which was approved by the Scottish Government and contained in their contract of employment, either expressly or implied through custom and practice. Pension 3.35 The pay policy expectation is that the pension arrangements for the Chief Executive should be in line with those for other staff of the public body Any proposal to offer employer s pension contributions in relation to a Chief Executive post, beyond those required under the pension scheme, in order to increase the benefit for the postholder would require approval by the Remuneration Group. Non-salary rewards (car, insurance, relocation expenses, etc.) 3.37 There may be a number of additional elements to the remuneration package offered to a Chief Executive over and above base pay. These are referred to as non-salary rewards. Where other staff employed by the public body benefit from such rewards, the arrangements which are to apply to the Chief Executive should be in line with these. Details of any such rewards must be included with any remuneration proposals when seeking Scottish Government approval. Cars 3.38 There is a presumption against the provision of a car (or any related allowance) However, where a Chief Executive is required to travel extensively as part of their duties, it may be cost effective to make arrangements regarding a dedicated car (for example; lease car, car allowance, etc.). In all cases, the provision or introduction of a car (or related allowance) will require Scottish Government approval. Approval will be given only where a clear financial benefit and a business need can be demonstrated Where a public body already has an agreed scheme for the provision of cars (or related allowance) for staff, any proposed arrangement should be in 14

16 line with that scheme. Otherwise, a public body must set out in the business case comparison of costings and implications of personal tax and insurance costs, that supports the proposed arrangement. This should also include other options considered, for example; a pool car and the arrangements in place for other staff. Life insurance and other health benefits 3.41 There is a presumption against the provision of life cover or private medical plans, etc However, in the rare circumstances where a public body offers its staff life cover or a private medical plan or similar, the Chief Executive should be eligible to become a member of the scheme. In such circumstances, public bodies must still provide details of the scheme when seeking Scottish Government approval of the remuneration proposals. In the absence of any existing scheme, approval will not normally be given for such arrangements. Please discuss any other life cover / health related proposals with the Finance Pay Policy team. Relocation expenses 3.43 Eligibility for and the levels of relocation expenses should be in line with those for other staff of the public body. In the absence of such a scheme, relocation expenses should be in line with that for the Scottish Government. Exceptionally, relocation expenses beyond such arrangements may be paid but only where this is necessary to secure the best candidate. In such circumstances, public bodies must consult the Finance Pay Policy team before reaching agreement with the incoming Chief Executive. What other factors must be considered? Value for money 3.44 The remuneration (pay range, salary and any other financial and non-salary rewards) must demonstrably provide value for money in the use of public resources and be no more than is necessary to attract, retain and motivate able staff, on a sustainable basis, to deliver public functions. Affordability and sustainability 3.45 Long-term affordability of the proposals is important and the public body must confirm it considers the proposals are affordable and sustainable. Proposals are expected to be affordable within existing resources. However, where additional resources are required, these must be set out clearly. In all cases, the Sponsor Team must confirm the affordability and sustainability of proposals, seeking the views of the relevant Finance Business Partner where appropriate. 15

17 What should the business case contain when a review or new post is being proposed? 3.46 When submitting proposals for approval, a public body must also include full details of the proposed remuneration package in its business case, together with supporting evidence: Element Job evaluation score Comparator labour market Determination of Pay Band in Chief Executive Pay Framework Proposed pay range Internal referencing with the senior management team Progression methodology Proposed starting salary (For new appointments to existing posts) consideration of the required 10 per cent reduction in remuneration package over outgoing Pension Bonus arrangement? Car (or related allowance)? Life insurance or other health benefits? Relocation expenses? Value for money Affordability and sustainability Points to cover in business case Job evaluation system used, date and results; date of increase in role / responsibility (where relevant); Relevancy and justification of labour market selected; comparator organisations used; median of salaries in that labour market, date of sample Advice from the Finance Pay Policy team Minima and maxima; further justification required if this exceeds the maximum in the Framework; must be less than the ceiling in the Framework Set out the pay differential over senior management team; if differences are proposed set out justification / rationale Set out proposals, taking into account equalities obligations; anticipated journey time, etc. Must be within lower quartile Confirmation this has been achieved or justification as to why not Details and confirmation in line with other staff Presumption against. Details (must be no more than 10 per cent of base salary) and justification Presumption against. Details and justification Presumption against. Details, justification or confirmation in line with other staff Details and confirmation in line with other staff Comment required Confirmation required What about temporary Chief Executives? 3.47 Any proposals to appoint a temporary, interim or acting Chief Executive (for example, a member of staff on temporary promotion) must first be discussed with the Finance Pay Policy team prior to implementing such an arrangement. The Finance Pay Policy team can advise on remuneration 16

18 arrangements for such appointments and whether approval might be required from the Remuneration Group If the proposed temporary Chief Executive is to be an internal candidate, then the proposed salary should be based on the public body s existing temporary responsibility allowance scheme. If there is no temporary responsibility allowance scheme in place, the arrangement should mirror that for Scottish Government staff. Such arrangements may be approved by relevant Senior Officials If the candidate is to be recruited externally then the approval process for new appointments, as outlined above, should be followed and approval by the Remuneration Group will be required Should a fixed-term appointment be considered appropriate, then the approval process for new appointments, as outlined above, should be followed and approval by the Remuneration Group will be required. The business case will need to set out the term and period of notice on termination and whether any compensation on termination may be payable. The relevant Finance Business Partner will still be required to confirm the value for money aspects of the proposal The remuneration arrangements that may be approved for any temporary Chief Executive may differ to those for the outgoing Chief Executive and in such cases would have no bearing on those of any future permanent Chief Executive. What to do if you want to vary a new remuneration package after it has been approved? 3.52 If, during negotiations with a prospective candidate, consideration is given to a remuneration package that differs from the one approved, a public body must seek the advice of the Finance Pay Policy team before any agreement is reached. The Finance Pay Policy team will advise whether approval by the Remuneration Group will be required. No commitment should be given to the prospective candidate until formal Scottish Government approval has been obtained. Sufficient time should be built in to the recruitment process to accommodate such an eventuality. Do you have to seek approval for the terms in a new contract? 3.53 It is a requirement of approval that a public body must consult the Finance Pay Policy team on the remuneration clauses in the draft contract before it is agreed. The contract must be in line with the Pay Policy for Senior Appointments and, in particular, Scottish Government approval must be obtained prior to implementing annual pay increases or paying any non-consolidated performance payment. The public body must take particular care to ensure the letter of appointment does not give rise to any contractual expectation which goes beyond that in any contract or the remuneration package as agreed by the Remuneration Group. 17

19 How is a Chief Executive to be paid? 3.54 Chief Executives are expected to be paid through payroll with tax deducted at source in the same way as other employees. Payments must comply with the Tax Planning and Tax Avoidance section of the Scottish Public Finance Manual: What to do if a Chief Executive is considering a public appointment or Non-Executive Directorship? 3.55 If a Chief Executive (or other senior employee) of a body covered by the Scottish Government Public Sector Pay Policies is considering a public appointment or Non-Executive Directorship then factors to be taken into account by the Chair / Board and Sponsor Team of the employing body include conflict of interest; time commitment; and remuneration. Such matters, including (where relevant) the need to liaise with the Sponsor Team of the public body to which the individual might be appointed, are outlined in more detail in the Public Bodies Information Update 109 which is available on the Scottish Government website at: 18

20 4. CHIEF EXECUTIVES: APPROVAL What must you do to seek approval of proposals? 4.1 If proposals are simply an uplift in line with policy, then the relevant template for Chief Executives is all that is required to be submitted. If, however, proposals entail a change in remuneration (for example, following a review) or remuneration relating to a new appointment, then they should include a business case from the public body and will require consideration by the Scottish Government Remuneration Group. 4.2 Completed Chief Executive templates, signed-off by the Chair, should be sent by the public body to the Finance Pay Policy team (copied to the Sponsor Team). Scottish Government approval must be obtained prior to implementing any award. 4.3 If a two-year deal is being proposed and there are proposals to front- or back-load the pay award, then further evidence (e.g. recruitment / retention) will also need to be provided to support this as well as: a statement on the levels of Basic Award proposed for other senior members of staff within the public body; and whether a two-year deal is also being proposed for such staff. 4.4 Where no change is proposed, conformation of details of the current remuneration package is all that is required to be submitted by the body to the Finance Pay Policy team, copied to the Sponsor Team. 4.5 Public bodies must obtain Scottish Government approval before advertising, negotiating the remuneration package, or appointing a Chief Executive and ensure sufficient time to obtain this is built into any timetable. 4.6 Remuneration proposals that are submitted significantly late will require approval by the Remuneration Group. How is the Scottish Government going to assess your proposals? 4.7 The Finance Pay Policy team will assess all remuneration proposals and rate them as Red, Amber or Green. 4.8 The Finance Pay Policy team will rate the proposed annual award or any new or reviewed remuneration proposals as Green if For a proposed annual award: Outturn information indicates that previous years remuneration was in line with previous years Pay Policies; there has been no other change in the remuneration package and non-salary benefits during this period; or the remuneration package is in line with what had been approved previously The proposed annual award is in line with the limits set out in Section 2 19

21 and the general requirements in relation to the Scottish Chief Executive Pay Framework, etc. set out in Section 3 The proposals do not include the introduction of private health benefits, life cover or car, etc. unless this relates to retention of any of these where this was agreed previously or is in line with arrangements for other staff Proposals for multi-year deals include confirmation as set out in section 2.6 Proposals are confirmed by the Sponsor Team as affordable and sustainable within existing budgets Additionally - for any new or reviewed remuneration proposals: The proposed pay range and salary is: based on a formal job evaluation; supported by clear and relevant market evidence; confirmed as meeting equalities obligations; and supported by a business case which covers all of the requirements set out in section 3.46 The proposed starting salary is in the lowest quartile of the pay range (section 3.27) and does not include provision for a performance related bonus (and, if applicable, the remuneration shows a reduction of at least 10 per cent over that available to the previous Chief Executive including the removal of any bonus provision (where applicable)) 4.9 The Finance Pay Policy team will rate any proposed annual award or new or reviewed remuneration arrangements as Amber if Outturn information indicates a breach of previous years Pay Policies or the introduction of non-salary rewards where these were not approved by Scottish Government prior to implementation Involves a proposed pay increase, progression or change in pay range, not following review, or the proposed payment of a non-consolidated performance payment and an explanation of the contractual position and reasons as to why this situation has arisen have been provided Additionally - for any new or reviewed remuneration proposals: The proposed pay range is not based on a formal job evaluation; or the proposed pay range maximum goes beyond the market median; or proposals are not supported by market evidence; or proposals are not confirmed as meeting equalities obligations; or the business case does not cover all the requirements set out in section 3.46 or does not support the proposals The proposed remuneration package includes provision for a non-consolidated performance bonus The proposed remuneration package shows a reduction of at least 10 per cent over that available to the previous Chief Executive but provision for a non-consolidated performance payment arrangement remains; or the proposed remuneration package shows a reduction of less than 10 per cent over that available to the previous Chief Executive but has removed the provision for a non-consolidated performance payment 20

22 arrangement The proposed starting salary is not in the lowest quartile of the pay range (section 3.27) The proposals could have a direct read across to other public bodies and / or a direct impact for other staff within the public body or Approval is being sought under an earlier Pay Policy but the increases are in line with that Pay Policy Such changes have been implemented without approval being sought 4.10 The Finance Pay Policy team will rate any proposed annual award or new or reviewed remuneration arrangements as Red if For a proposed annual award or any new or reviewed remuneration proposals: The proposals are not in line with the limits set out in Section 2. The proposed pay range maximum or salary is above the relevant ceiling in the Scottish Chief Executive Pay Framework Proposals are not confirmed as affordable and sustainable within existing budgets by the public body or the Sponsor Team Who is going to approve your remuneration proposals? 4.11 Where no change is proposed then all that is required is a simple confirmation of the current remuneration package by the public body to the Finance Pay Policy team Where the proposed annual award is in line with Pay Policy and has been rated as Green by the Finance Pay Policy team, then the sponsor Director should confirm affordability, together with confirmation they are content with performance, to the Finance Pay Policy team. Once this has been received the Sponsor Team may notify the public body. The Finance Pay Policy team will also notify the Remuneration Group at the next meeting Where the proposed annual award has been rated as Amber by the Finance Pay Policy team, then the proposals must be approved by the Remuneration Group Any proposals for a new Chief Executive appointment or a review of an incumbent Chief Executive s remuneration package must be approved by the Remuneration Group Remuneration proposals for previous years that are submitted significantly late will require to be approved by the Remuneration Group, even if they could have been approved by relevant Senior Officials under the Pay Policy for the year to which the proposals relate. 21

23 4.16 For those proposals which are referred to the Remuneration Group, a submission must be put forward by the Sponsor Director. This submission must include full details of the proposals and a confirmation of affordability. Where applicable, an explanation will also be required as to why any proposals are significantly late. The Finance Pay Policy team should also be asked to contribute advice to this submission. The Remuneration Group will either approve the proposals or they may refer the approval to Ministers where they consider there is likely to be significant Ministerial interest If any aspect of the annual increase or remuneration proposals are rated as Red, then the proposals cannot be approved. The public body must review any such proposals, following advice from the Finance Pay Policy team. If the proposals have already been implemented, then a submission must be provided by the Sponsor Director to the Remuneration Group together with an explanation for why this has occurred. How long should any approval take? 4.18 Allow for up to five working days for consideration by the Finance Pay Policy team. If the issue is complex and is likely to take longer, then the Finance Pay Policy team will advise the sponsor body and Sponsor Team If the proposals are referred to the Remuneration Group, then these are normally considered at the next available Remuneration Group meeting (the dates of meetings are set out on the Scottish Government Public Sector Pay webpages: Some items may be able to be taken in correspondence. Referral to Ministers will require further time. What might happen if the Pay Policy for Senior Appointments is not followed? 4.20 If any payments are made without approval being obtained, this could result in punitive action being taken by the Scottish Government, such as the recovery of any overpayments, the capping of future increases or a governance review of the public body. 22