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- First step is to classify roles as ‘local, regional or national’
- This classification depends on the complexity of the role and number of jobs in the market
- Frameworks on national pay should be limited to most senior positions to maintain fairness and coherence
Public sector organisations need to assess which public sector roles have a local, regional or national markets before tackling the issue of regional pay, says Mercer. As most lower and mid-tier roles are filled by recruits from the local labour markets, a local approach to pay in these cases is sensible. However, for more senior and specialist roles organisations compete for staff from the national labour markets so salaries should be approached differently.
The comments come in the submission that Mercer’s Public Sector Reward team has made to the Office of Manpower Economics as part of the Pay Review Bodies’ call for evidence on regional pay.
The consultancy has also said that frameworks on national pay should be limited to the most senior roles in the public sector and that, where national frameworks are used to determine the pay of other highly paid roles, there should be a high degree of flexibility. The government has asked the Pay Review Bodies to make recommendations as to how regional pay could operate in June this year.
“The arguments are strongly in favour of local pay decision making as this ensures that public sector services can adapt jobs, pay systems and the underlying talent and HR processes quickly and in a cost-effective manner to suit local needs,” said Daniel Hibbert, Principal at Mercer and Public Sector pay specialist. “The question as to whether regional pay is suitable rests on whether a job operates in a local, regional or national employment market. Most public sector roles operate in local or regional markets but larger roles - which require high levels of specialist skills – operate in more mobile national markets so a national approach is more appropriate. The Government needs to give local organisations the flexibility to determine their own approach based on their analysis of their workforce.”
There are actually relatively few public sector jobs where national markets apply, believes Mercer. Most roles (including administrative positions, nurses and customer services representatives, and may other delivery roles) employ staff from the local market. More specialist roles, or those with greater job responsibility, tend to recruit from national job markets. For example, the skills for a senior manager with experience of turning round a failing organisation might not exist locally so the employer will be pushed into looking more broadly within the UK for the talent.
“There are pull as well as push factors for these more senior jobs,” said Daniel Hibbert. “Larger higher paid roles pull in recruits from outside the local area as individuals are more likely to commute longer distances. It’s also worth noting that employees doing these types of jobs are more likely to place career choices ahead of personal and lifestyle issues, so they are more likely to consider relocating. It’s vital that regional pay is applied properly so pay decisions capture the complexity and range of public sector roles and the employment markets in which they operate. If regional pay is imposed centrally through rigid national pay frameworks i this would ultimately undermine the provision of effective public services.”
Mercer is a global leader in human resource consulting and related services. The firm works with clients to solve their most complex human capital issues by designing and helping manage health, retirement and other benefits. Mercer’s 20,000 employees are based in more than 40 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global team of professional services companies offering clients advice and solutions in the areas of risk, strategy and human capital. With 53,000 employees worldwide and annual revenue exceeding $10 billion, Marsh & McLennan Companies is also the parent company of Marsh, a global leader in insurance broking and risk management; Guy Carpenter, a global leader in providing risk and reinsurance intermediary services; and Oliver Wyman, a global leader in management consulting. Follow Mercer on Twitter @MercerInsights