The full response from Norfolk County Council to our public sector pay and payout findings
- Credit: Bill Smith - Archant
The full response from Norfolk County Council to our series of questions on public sector pay.
In the five financial years since 2010/11 some £31.2m has been handed out in exit packages for people leaving the authority. Why is this figure so high? In Cambridgeshire that figure was below £10m.
The data are:
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Schools are included (and are outside the council's direct control) but account for a small proportion of the cost.
In 2010/11 the council at the time responded to the central government austerity programme by making a substantial reduction in the number of staff.
Numbers of non-schools staff have been reducing as follows:
• March 2010: 7,788
• March 2016: 5,426
That is a difference of 2,362 full time equivalent posts - or 30%. These figures include a number of outsourced jobs as well as reductions.
2010/11 Budget: Employee costs £698.6m
2015/16 Budget: Employee costs £519.7m
These include Schools.
Redundancy entitlement was revised in 2011. Before that date staff contracts gave staff an entitlement of double the statutory number of weeks' pay,. That was reduced to the statutory number of weeks' pay. This has brought down redundancy costs.
Although 'exit package' is an official accounting term, its use can confuse, seeming to imply a 'deal' with a departing member of staff. It combines a redundancy payment with the added 'pension strain'*
*Under the Local Government Pension Scheme legislation if a member of staff is made redundant over the age of 55 they have a legal right to start receiving the pension they have earned to date from the point of redundancy, without any reduction because they are receiving it before their normal retirement age. Similar provisions exist in the other major public service pension schemes.
When we start paying pensions earlier than planned, and therefore for longer like this, there is a financial cost. The Pension Fund calculates this cost and the employer making the redundancy pays this additional sum into the Fund. This is referred to as pensions strain. The lump sum cost is not received by the employee concerned, but is made to the Pension Fund to allow for the proper funding of the pension scheme in accordance with our statutory obligations as an employer.
The total cost of a redundancy is assessed when analysing the cost/benefits of service restructuring.
How is it determined that someone should receive an exit package and at what scale?
Our severance pay policy does not depend on grade or scale - the same policy applies to all levels. If people are made redundant we have statutory and contractual obligations, and statutory redundancy payments are triggered, and in some cases depending on age and pension membership, pensions payments too.
Two of these were above 150k, eight between £100-150k and 17 between £80-100k. How is an exit package figure determined?
Statutory Redundancy pay depends on length of service and weekly pay, as provided in law. Pension strain costs vary according to scheme membership, age and pay level.
As mentioned above, redundancy of staff aged over 55 triggers access to pension rights in the LGPS, and the employer has to pay the pension strain. This is also a statutory provision and the Council has no option once the decision to terminate employment is made.
Any severance payment of £100k or more has to be approved by Full Council. None has been taken to Council for approval since this provision was introduced in November 2013 following debate in Full Council.
Is the council satisfied with the exit package scales that it has been working from?
The Council operates the statutory provisions as it is required to do.
The highest year was 2011/12 when just over £9m was handed out. Why was this year particularly high?
In 2011/12 the then administration's response to the austerity agenda began to see reductions in staff numbers.
Numbers of severance Packages reported in Statements of Accounts (including those in schools) were:
2011/12: 791 (33pc of total)
PAY SCALES AND BONUSES
There were 13 members of staff earning over £100k in 2014/15, compared to just eight a year earlier. Why has there been a sudden rise when overall staffing levels have fallen?
The figure (excluding schools) in the Statement of Accounts for 2013/14 is actually 9, not 8.
One reason is that in 2013/14 several officers were not in the job for the full year, so did not get the full year's salary. The numbers will fluctuate year on year even if the number of posts do not change.
Another factor was that two officers saw their pay increase in July 2013 within the grade due to incremental progression, tipping them just into the £100,000 pa band for 2014/15.
We have not increased the numbers of senior posts. The number of posts with a maximum salary of £100,000 or more is now 14. It was 15 in 2013.
In 2008/09 seven senior members of staff earned bonuses ranging from £2,300 to £10,500 and totalling £45,300. In 2009/10 chief executive David White received an £18,900 bonus and seven senior staff received £67,000. In 2010/11 £48k was shared between eight in what was then classed as 'performance awards'. These have not been mentioned/handed out according to accounts since that year. But four senior members of senior staff who in 2010/11 received £17,500 between them in 'performance awards', saw their wages rise for 2011/12, when no such awards were handed out, by a combined total of £33,900.
These were Director of Community Services, Director of Environment, Transport and Development, head of finance and head of customer services and communications. For instance Director of Community Services saw his salary rise from £127,700 plus £5,800 in bonuses (£133,500) to £138,500. Why is this? Why did the bonus payments stop and who decided those four members of staff should then get pay rises?
The Senior Management Performance Related Pay scheme at the time was similar to many that operated in local government at the time. It provided for accelerated incremental progression within the grade - one, two or three increments depending on performance. The scheme ended in 2010. Since then incremental progression for senior staff has been by one increment only, subject to satisfactory performance, until the top of the grade is reached. That is the same arrangement as for all other staff.
In 2010/11 the value of the additional increments was reported as a bonus payment, as that was the most transparent way of reporting the payments. But in the following year those increments had been consolidated into basic pay, so are included in the basic salary figure. The only actual increase in 2011/12 over 2010/11 was one increment (where appropriate) under the Council's pay progression arrangements.
LOSS OF OFFICE PACKAGES
Upon leaving in 2013, David White received £163,700 compensation for loss of office, on top of a £205,300 salary and £31,800 employer pension contributions, equating to more than £400k package. How was this figure determined?
Meanwhile, Lisa Christensen also received £145,400 compensation for loss of office for leaving her role in July 2013. How was this figure determined?
The detailed breakdown is reported in the Statement of Accounts for 2012/13:
'The compensation for loss of office consists of a payment to the former Chief Executive of £106,100 (redundancy of £35,400, payment for contractual notice of £63,600 and untaken annual leave of £7,100) and costs to the county council of terminating employment of £57,600 (employer pension strain of £48,000 and employer national insurance cost of £9,600).'
Total cost: £163,700. All these elements were statutory or contractual.
Note that the payment in lieu of contractual notice was in respect of the period which Mr White would have worked in 2013/14 had he worked his notice, so did not cover the same period as his salary for 2012/13.
Payments related to Lisa Christensen's severance comprised pay in lieu of notice of £23,248 and a one-off payment made into the Norfolk Pension Fund of £122,203.46 as a result of her early retirement.
To be clear, this latter sum was not paid to Ms Christensen.
The head of finance role was £97,400 in 2008/09 but in 2014/15 interim executive director of finance P Timmins received £182,300,
Sheila Lock, as interim executive director of children's services, was paid £259,800 in 2014/15, a role which paid £139,500 when performed by Lisa Christensen in 2012/13.
And in 2014/15 interim director of communities and environment T McCabe received £210,400 for 11 months work (£19,127 a month), but when properly in post he was paid £11,600 for one months work. Why do interim roles pay so high. Some have called them costly and bad for long-term planning. What is your response to this? What are the merits to interim positions?
There is a national shortage of staff at director level and this is particularly true in children's services where the rigours of the regulatory framework, high profile court cases regarding vulnerable people, public expectations and the high exposure to risk all make recruitment challenging across the country.
Having a Director of Children's Services is a statutory requirement for County Councils and in 2013 we recruited Sheila Lock through an agency and under her guidance the department made substantial progress.
The figure on the left compares the salary alone of a member of staff, but with no 'on costs' in terms of pension, employers NI or added costs. The figures quoted are payments to agencies, not directly to the interim employee who will come to their own arrangement with the agency. From the figure they receive from the agency interims will be expected to fund their own NI and pension, make their own leave arrangements and receive no funding for sickness or notice.
The Local Government Association has advised against 'off payroll' agreements as they an incur higher costs - yet the latest figures show Norfolk County Council has 9 members of staff, over 50k a year, earning such a figure. Why is this?
The use of interims, as defined above, is extremely limited – nine out of 5,000 people.
Interims are occasionally brought in because they have particular expertise which is needed urgently by the council, or because of difficulties recruiting in the normal way. This may be while the process of recruiting a permanent member of staff continues or, for example, help in reviewing how a department or service operates. The named interim appointments you identify reflect the turnover at the council following the departure of the Chief Executive and the Ofsted report rating the council's children's services as Inadequate.
Interim staff are usually employed through agencies to provide short-term cover or as interim appointments. People offering their services in this way have a proven track record in their field. As such, they can provide high levels of expertise that is not available to the County Council in other ways, or at such short notice. Day rates only apply for the time actually worked. This does not include pay for holiday or sickness, and such staff are generally on short time limited assignments.
General – some would believe the figures for high earners and the number of large payouts to be high at a time of pressure on cashflow. How would you respond to that? Any other points?
In recent years, our number of senior managers has fallen, performance pay has been ended and redundancy payouts reduced in the light of cuts in grant from central government. The overall size of our workforce has reduced significantly as we have found new ways of delivering services to the people of Norfolk. However people who are made redundant have statutory rights and the council will continue to meet those.
Our Managing Director Wendy Thomson was appointed in 2013 on a considerably reduced salary compared to her predecessor.
The Authority faces major financial challenges in the years ahead and needs to deliver further savings of at least £115m between now and 2019/20 and this will undoubtedly involve some one-off costs. – but we will continue to adapt to reductions in Government support by providing good quality services which provide value for money for council taxpayers.