Need to know:
- In the public sector, financial constraints, benefit guidelines and stakeholder scrutiny can make reward more challenging.
- Years of reforms mean public sector employees often perceive their pensions as offering poor value: creative communications could help to change this misconception.
- Highlighting benefits such as flexibility, training and development, and the sense of purpose that can be gained by working in the public sector can create a compelling employee value proposition.
Public sector reward and benefits packages often get a bad rap. But, while the range of benefits may lag those available in the private sector, public sector reward professionals work hard to promote a compelling employee value proposition.
Several constraints can make it more challenging to build a reward package in the public sector. As it is largely funded by taxpayer money, scrutiny from stakeholders such as politicians, the media and think tanks means reward professionals must be mindful of what they offer. Charles Cotton, senior reward adviser at the Chartered Institute of Personnel and Development (CIPD), says: “This prevents employers from offering certain salary levels and perks.
“Some benefits that are widespread in the private sector, such as Christmas parties, gifts or free cups of tea or coffee, are not as common in the public sector.”
As well as ruling out some benefits, budgets are under significant pressure across the public sector. Chris Last, trading director at Perkbox Vivup, says: “Reward strategies are at the mercy of the public purse and times are tight. Organisations have to be creative to ensure employees value and engage with what’s on offer.”
Procurement protocol
To ensure the most efficient, and appropriate, spend of public money, there is much more structure around reward across the public sector. But, while terms and conditions of employment are set at a sector level, there is room for flexibility at an individual employer or department level.
As an example, Andrea Hester, deputy director, employment relations and reward at NHS Employers, explains how this works in the NHS. “Employers across the NHS must apply the terms and conditions on hours of work, annual leave, parental leave, and flexible working,” she explains. “However, they can take their own approach to other benefits such as health and wellbeing, childcare and learning and development. This allows each employer to set a reward package that meets and supports the needs of the workforce.”
While there is some freedom, public sector benefits professionals must select from a preferred supplier list or framework. Although this may feel restrictive, it delivers several benefits. “Organisations have the reassurance they’re selecting from best in class and that all the due diligence has been undertaken,” says Last. “And, given the size of the public sector, they also benefit from significant economies of scale.”
Pay and pensions
A defined benefit pension is widely regarded as the pinnacle of the public sector reward proposition. Graham Crossley, NHS pensions expert at Quilter, says: “It offers exceptionally good value, especially when compared to a defined contribution scheme in the private sector. Schemes are generous but employees don’t necessarily perceive this. Anyone who’s worked in the public sector for any length of time will have seen reforms reduce the benefits, for instance the move from final salary to career average.”
Recent pay freezes probably contribute to this employee perception. Austerity measures have kept pay rises low across the public sector since 2010, with knock-on effects for staff on lower wages. Fran Heathcote, general secretary of the Public and Commercial Services Union (PCS) explains: “As a result of below inflation pay rises, employees on lower grades have had higher pay increases to bring them in line with the national living wage. This can mean the bottom two grades are paid the same.”
Health and wellbeing
While pay may struggle to match the private sector, employee health and wellbeing is a key benefit across the public sector. Although private medical insurance is a no no due to the potential conflict with the NHS, employee assistance programmes (EAPs), mental health support and health cash plans are commonplace. There are some good initiatives across the civil service, says Heathcote. “Where a programme is promoted well and managers are trained to discuss it with their staff, it can be of value,” she says.
Financial wellbeing also features heavily, through discount platforms, voucher schemes and salary sacrifice arrangements on items such as home electronics and bikes for work. “It’s been difficult to award pay rises over the past few years so promoting a discount on the supermarket shopping or offering home electronics [via] salary sacrifice can help an employee make their money go further,” says Last.
This focus on health and wellbeing also extends to areas such as sick pay and time off in lieu, where arrangements tend to be more generous than in the private sector.
Creative licence
Reward professionals across the public sector are also encouraged to look beyond these benefits and focus on the total reward offer. “Benefits such as flexibility and training can increasingly make a very significant difference to how an employee views their employment,” says Hester. “Being able to clearly articulate this message and the details of the reward offer in its entirety is a powerful tool for employers in supporting recruitment and retention across the NHS and the wider public sector.”
There is certainly plenty to shout about. David Wreford, partner and senior workforce transformation consultant at Mercer, explains: “There’s much more tolerance in the public sector around flexibility, home working and supporting employees with caring responsibilities. Being able to balance work and home commitments can deliver a much stronger sense of belonging.”
Learning and development also features heavily in the public sector offering. Shifts in the way services are delivered, for instance, increased use of technology or a move to deliver more healthcare in the community, mean training is essential. In addition, clearly defined career pathways and development plans can support employees and aid retention.
The vocational aspect is also important, with public service motivation often a key reason for taking a public sector job, says Wreford. “People get a huge sense of purpose from helping people, whether as a doctor, teacher or a member of the army,” he says. “Organisations should consider this when putting together an employee value proposition.”
Communication programme
Financial pressures mean organisations are getting smarter in the way they communicate reward to employees. Diverse workforces across public sector organisations mean reward professionals must embrace a mix of different media to ensure they reach every employee. “Communications could be online through emails or on an app, or offline at roadshows or on posters,” says Last. “We’ve even added a QR code to the tag in staff workwear to give them a link to the EAP.”
More effort is going into highlighting the value of the benefits too. For example, after seeing an increase in employees opting out of the pension during the cost-of-living crisis, some NHS trusts are adding hypothetical annuity costs to the total reward statement, says Crossley. “Rather than simply saying what a future pension would be worth each year, it tells them how much money they would need to buy the same benefit from an annuity. By highlighting the value of the pension, it could help to persuade some employees to stick with it.”
And, thanks to the change in government and a series of public sector pay deals, there is already greater optimism about the future. The new government will be under pressure to restore the purchasing power of public sector workers, says the CIPD’s Cotton. This could have benefits for recruitment, retention and employee relations.
