Hutton proposes pay ratio cap for public sector execs


The salaries of senior executives in the public sector should remain within a given ratio of those of other staff members, according to the Fair Pay Review.

The review, which is being led by HR columnist Will Hutton, was commissioned in May by the Prime Minister and Chancellor to investigate how pay in the public sector, will make its final recommendations in March next year.

According to the review’s interim report, published today, there are 20,000 public workers earning more than £117,523, making them in the top 1% of earners in any sector. Such salaries have been increasing at a rate of 5-6% a year, compared to the 3% national average, and stand at an average ratio with lowest paid public sector workers of 12:1.

However, at FTSE 100 companies CE wages have increased by two and half times since 1998 and are around 88 times higher than their worst paid employees.

The heads of the Olympic Delivery Authority, Transport for London, the Nuclear Decommissioning Authority and Ofcom all make over £300,000.

To protect against imbalance, Hutton has suggested the institution of a maximum pay ratio, ensuring senior executives can be paid in a proscribed proportion to their poorest paid staff.

The report suggests that an ‘arms race’ of senior salaries in the private sector has infected public sector organisations because of their recruitment from businesses, particularly organisations with greater decision making authority, such as universities and foundation trusts.

Hutton said: "This would demonstrate fairness by reassuring public opinion, address a problem of collective action across remuneration committees, and benefit organisations’ productivity."

"The range of top pay deals across the public sector has little coherence or relationship to the public’s priorities in generating genuine public value.

"The public sector should be cautious about simply adopting ‘best practice’ from the private sector, as private sector pay practices and corporate governance have not delivered proportionality in pay.

"Without clear principles there is every prospect of the rise and potentially irrational range in senior pay settlements continuing – which will accentuate already growing concerns about pay fairness."