House of Commons - Local government Chief Officers' remuneration - Communities and Local Government Committee

Local government Chief Officers' remuneration - Communities and Local Government Committee Contents

4 Can remuneration reflect performance?

Rewarding good performance

23. There are different ways in which good performance can be rewarded, for example through award of bonus payments, accelerated movement through pay scales, or earn-back mechanisms.[70] In contrast to other sectors, most councils do not offer their senior managers bonuses or other forms of performance pay for meeting or their exceeding targets.[71] Witnesses cautioned that there was little public acceptance of bonus payments for senior council staff since bonuses carried a "certain tarnish".[72] The Minister considered that a bonus could be seen as a reward for somebody "doing the job they were hired to do in the first place".[73]

24. There are practical requirements to be met if councils are to adopt remuneration policies that link pay to performance effectively:

· First; there needs to be a robust and clear method of appraising staff.[74] Witnesses suggested different approaches to performance appraisal in terms of how it was undertaken and who was involved in the process. It was apparent that in some councils the performance assessment of senior officers was poorly developed and lacked transparency and clarity. For example Rochdale Council admitted that it had no formal appraisal process,[75] and Graham Farrant, Chief Executive of Barking and Dagenham/Thurrock Councils told us his appraisal process left much to be desired.[76] Effective performance assessment systems are crucial not only to support the development of individual senior staff, but also to ensure that councils receive performance from the post holder commensurate with the salary paid (including any discretionary payments and bonuses offered by some local authorities).

· Second; appraisal processes need to be able to isolate an individual officer's contribution. This can be difficult when the achievement of overarching objectives depend on the contributions of many internal and external stakeholders who are not under the post-holder's control. Furthermore, witnesses considered it difficult to measure a Chief Officer's impact since, unlike parts of the private sector where additional profit could be measured, many council objectives were hard to quantify.[77]

· Third; appraisal processes linking performance and reward must be clearly set out and published, in particular where any additional payments or bonuses are to be paid. However, arrangements in most councils are opaque. Even where there are explicit assessment processes, as in the case of Surrey County Council where the Chief Executive's objectives are reviewed regularly with a panel of councillors and external stakeholders,[78] detailed information on the appraisal is not made available to councillors or the public. A summary of the appraisal is provided to the Cabinet but the full council receives only a report on council performance not on the Chief Executive's contribution.[79]

25. If councils are to award their senior staff additional rewards such as bonuses these must be sensitive to local circumstances and be based on clear evidence of personal, additional contribution. However, many councils have only weakly developed and articulated mechanisms for assessing their Chief Officers' performance and bonuses may appear to be paid to those simply undertaking their normal responsibilities. It is essential that there are robust appraisal systems for Chief Officers. We recommend that the Local Government Association updates and publicises guidance on how to appraise senior officers. In addition, whilst the individual appraisals of an officer are not normally published, nor should they be, the Department for Communities and Local Government should require councils to publish the method so that local residents can see how robustly senior staff performance is assessed, and if linked to remuneration, how the performance-reward link is determined.

Under-performance

26. Legislation and regulation already requires councils to publish information on policies regarding severance of Chief Officers,[80] and for details of severance payments to be published in annual accounts.[81] Despite this, there has been much public concern over senior staff, including Chief Executives, being awarded redundancy payments inappropriately, in particular to incentivise them to leave rather than having their poor performance tackled.[82] Witnesses such as the Chief Executive of Camden Council told us that sometimes swifter action than performance management could achieve was needed to prevent deterioration in key services.[83] The LGA witness also told us that undertaking a performance competency process can be "very damaging and time-consuming".[84] There are also circumstances where staff leave on a change of political control.

27. Information on what payments have been made, and to whom, can be difficult to find and there can be a significant time delay between a decision to make a payment and its disclosure in annual accounts. There has been criticism of councils which do not publish information quickly about payments made to senior staff leaving their employment.[85]

28. Many councils do not have robust approaches to identify and tackle under-performance by senior staff which means some find it easier to pay them off inappropriately rather than address the underlying failure. The blurring of processes and the opaque manner in which some of these payments have been made has meant that local taxpayers may often not be aware when redundancy or discretionary payments have been mis-used. This does not deliver best value for local taxpayers. Councils must publish the rationale for, and amount of, any financial payment to a departing Chief Officer within a month of the decision to make the award so that the public can understand why such a payment has been made. Furthermore the public must be assured that effective appraisal processes are being followed and, as we recommend above, the Department for Communities and Local Government should require councils to publish information on the method used to appraise senior staff so that local residents can clearly see how any problems with performance will be addressed.

29. The Government has expressed concern about senior officers taking redundancy payments from one council only to move straight into another public sector role, including in consultancy roles.[86] Witnesses such as the TaxPayers' Alliance echoed this concern, noting public "frustration" at those earning six-figure salaries being handed six-figure pay-offs merely for leaving a council's employment early and then taking another high paid council job.[87] This year's Queen's Speech set out proposals to address this 'revolving door' problem but, at the time of our oral evidence session in June, the DCLG Minister did not have further details on how this would affect staff required to leave one employment through no fault of their own who wish to take up employment in the same sector.[88]

30. We welcome government moves to prevent the 'revolving door' where senior staff in receipt of large redundancy payments immediately take on another highly-paid job in the same sector, or even undertake the same work for the same council as a consultant. This does not deliver best value for the taxpayer and in cases where an individual's performance has been inadequate represents a mis-use of public money. But we caution that the proposals must not penalise those made redundant through no fault of their own and who may naturally look to secure quickly another similar level job in the same sector. Close attention must be paid in developing the detailed proposals to protect such staff whilst ensuring abuses of redundancy arrangements (such as re-hiring staff immediately as consultants) are prevented. We await the details of the Government's proposals and subject to time constraints, we will wish to return to this issue later in this year.

70 Earn-back is a performance pay system where an element of pay is 'at risk' such that an employee loses this element if objectives are not met. Bonuses for performance beyond expectations are not excluded in such a system. See Will Hutton, Hutton Review of Fair Pay in the Public Sector: Final Report, March 2011, para 3.16. Witnesses had mixed views of earn-back with some arguing that it could be inflationary if councils added the portion of salary to be earned back to base salaries. (Q265 [Peter Smith]) Back

71 For example, evidence from the Regional Employers' Director for local authorities in the Yorkshire and Humber Region states that performance related pay is not common in the region (COR 01) para 2 Back

72 Q226 Paul Martin; see also LGA's reservations on bonuses at Q70. Back

73 Q450; this point was also made by Redcar and Cleveland Council (COR 03). Back

74 A point made by Solace witness, Mark Rogers, see Qq428-430. Back

75 Q350 Back

76 Q180 Back

77 For example, Alace witness Mary Pett noted these difficulties, see Q439. Back

78 Q281 Back

79 Qq 375-378 Back

80 Localism Act 2011, section 38(4)(f) Back

81 Accounts and Audit (England) Regulations 2011 (SI 2011/187) Back