Pay cuts set to be given to poor performing public sector bosses

Senior public sector staff face having their pay cut if they fail to meet performance targets, a review of executive pay has recommended.

Will Hutton, economist and head of the Work Foundation, who was asked by the government to review executive pay among public sector workers, has proposed that senior public servants' pay should be more strongly linked with performance.

This would be achieved by withholding a proportion of executives' pay on an annual basis, so it has to be earned back each year through meeting pre-agreed objectives. This will allow pay to vary down and up with performance, and ensure that public services do not offer rewards for failure.

Hutton also recommended that all public service executives' full pay should be disclosed each year, along with an explanation of how it relates to job weight and performance.

The review also said that the government should not benchmark senior public servants' pay against that of the prime minister and should not impose a fixed limit on pay multiples such as 20 to 1.

In addition, the multiple of chief executive to workforce median pay should be published each year, and any changes explained.

Public service executive pay, said Hutton, needs to be understood in the context of job responsibilities and the Senior Salaries Review Body should publish fair pay reports, detailing pay multiples across public services. public limited companies should also be required to track and publish their pay multiples.

Charles Cotton, reward adviser at the Chartered Institute of Personnel and Development (CIPD), said: “We particularly welcome Will Hutton’s robust recommendations that top public sector pay should be better aligned to an assessment of individual and organisational performance.†

"In the current climate the word ‘bonus’ has become a dirty word, but taxpayers will benefit if variable pay is effectively tied to performance measures that can demonstrably improve the delivery of public services.

"We recognise there will be challenges in setting meaningful and stretching performance targets and methods of assessment, but these challenges can be met in a way that ensures pay set in this way does what it is meant to do – which is drive real improvements in performance.

"In going down this road, it is important to ensure that bonuses are used as an alternative, though complementary, reward tools. They should not simply replicate or replace what is already being rewarded and recognised through pay awards and promotions.”