Guidance

Civil Service pay remit guidance 2020/21

Published 18 May 2020

1. Scope and purpose of the pay remit guidance

This guidance covers pay setting arrangements for civil servants throughout the Civil Service, including departments, non-ministerial departments and agencies, as well as for public sector workers in non-departmental public bodies (NDPBs) and other arm’s length bodies. (Throughout the guidance the term “department(s)” includes all organisations - ministerial and non-ministerial departments, agencies and NDPBs - that come within its scope, unless the context clearly implies otherwise. Organisations should contact their parent or sponsorship department to seek guidance from the Cabinet Office - contact details found in Section 7 - if unsure whether they are in scope of the guidance.) Where reference is made to civil servants, it also includes references to other workers employed in an organisation covered by this guidance. The guidance provides a framework within which all departments will set pay for 2020/21, and for departmental pay strategies and pay reporting. This guidance does not apply to departments that are already in arrangements outside of the pay remit guidance including those in multi-year deals. A glossary of terms used in the guidance can be found in Section 8.

2. Key factors determining the 2020/21 pay award

2.1 Average pay awards

This year, departments are able to make average pay awards within the range of 1.5% to 2.5%.

The percentage increase will refer to overall pay awards and individuals may receive a higher or lower award, as it is for departments to target their pay award based on their own workforce and business needs.

Departments may make pay awards within the range based on their individual workforce requirements and affordability position. Departmental negotiations will provide an opportunity to explore the complexities in funding a higher pay award and the trade-offs that may be required to ensure the award is affordable.

Departments paying an average award of more than 2% and up to 2.5% must demonstrate tangible outcomes based plans, with milestones, for progress against delivery of key long term priorities such as workforce transformation and improvements, including through automation, location strategy and addressing pay anomalies in their remit to the relevant Secretary of State as set out in section 4.2. Cabinet Office will collect information during the remit year to confirm that this condition has been met for awards in excess of 2%.

All elements which increase paybill cost must be included in the calculation of the pay award, except employer National Insurance Contributions and employer pension contributions. For example, the following must be included:

• re-valorisation
• any remaining historic progression increments
• introduction of new allowances
• increases to existing allowances
• cost of increases in the non-consolidated performance pot above its existing proportion of total paybill
• non-consolidated payments (except for payments related to performance from the non-consolidated performance pot)
• buy-out of allowances or non-pay entitlements
• incentive payments relating to the implementation of pay reforms
• cost associated with changes in non-pay benefits (e.g. leave entitlements)
• increases arising from pay restructuring (e.g. associated with machinery of government changes or repositioning staff within the pay range)
• non-pay rewards
• salary sacrifice schemes

As set out above, if a department makes any changes to elements of their paybill this forms part of their total paybill. If that presents an increase in remuneration costs for the remit year above the controls set out in this guidance, i.e. 2.5%, then further approval is required from Cabinet Office and HM Treasury Ministers

Departments should contact the Cabinet Office for advice if they are unsure if the introduction of an allowance would contribute to their pay award.

Cabinet Office and HM Treasury will consider requests from departments for pay flexibility proposals where it meets the requirements set out in Section 3. Departments are encouraged to discuss any potential business case with the Cabinet Office in the first instance at civilservicepay@cabinetoffice.gov.uk. The deadline to submit a case for the 2020/21 remit year is no later than 31 January 2021.

Civil Service pay remits will not ordinarily be reopened once the relevant Secretary of State has approved them.

2.2 National Minimum Wage & National Living Wage

From 1 April 2020, departments must ensure that they apply the legislative increase to the National Living Wage (NLW) and National Minimum Wage (NMW). The cost of raising individuals to the new rates, can be funded outside of the headline pay award (taking the overall award to in excess of 2.5%) or as part of the headline award. This will be the increase in the cost over 12 months from the date of the 2020/21 pay award.

2.3 Holiday Pay

Employees are entitled to holiday, paid at a rate which reflects their actual earnings, so that they do not see a reduction in earnings when on annual leave. This calculation will vary by department and may include payments such as regularly worked overtime, and departments should ensure that they are fully compliant with their legal obligations.

Increases in remuneration made specifically to fulfil the legal obligation to include payments for regularly worked overtime in statutory holiday calculations should be considered outside of the headline pay awards, providing that the increases are made only to the extent that they fulfil the legal requirements. Any element of such payments from departments that exceeds the required legal obligation should be expected to seek explicit HM Treasury consent, before the payment is made, as per the processes detailed in Managing Public Money.

2.4 Recyclables

Recyclable savings are generated when staff leave the department and are replaced by entrants with a lower cost. Where a saving to paybill is demonstrated, between the leaver’s salary cost and the entrant’s salary cost, this can be used to meet the cost of an average award up to 2.5% as long as the department is also demonstrating progress against delivery of key long term priorities as set out in section 2.1.

Where recyclable savings can be found that enable a department to pay more than a 2.5% headline award, they should be expected to submit a business case demonstrating how this investment would be sustainably affordable in future years.

Departments would be asked to provide supporting evidence to monitor such arrangements, and further guidance on the application and monitoring of Recyclable Savings will be circulated to organisations separately.

2.5 Pay progression

Departments continue to have authority to move employees through pay bands by targeting pay awards relative to position within pay band. This does not require additional approval by the Cabinet Office and HM Treasury. Departments may also, subject to approval by Cabinet Office and HM Treasury, look to introduce arrangements that enable movement through pay bands based on achievement of higher workforce productivity e.g. growth of capability. If departments are looking for a longer term approach to individual pay that delivers sustainable savings, they should contact Civil Service Employee Policy (CSEP) for further advice on the options which could apply.

Departments should have now removed automatic progression pay based on time-served from their workforces and it should not be reintroduced. Any progression pay still in place in core departments or their ALBs not agreed through business case approvals will be in breach of government policy and must be notified to the Cabinet Office and HM Treasury immediately. Going forward, departments should ensure that pay arrangements they put in place do not involve automatic time served progression pay, or create an entitlement for employees to receive automatic increments.

2.6 Performance related pay awards

Non-consolidated performance pay will continue to be managed, as in previous years, within each department’s non-consolidated performance pay “pot” calculated as a fixed percentage of pay-bill. With the agreement of HMT and Cabinet Office, departments have the option of transferring between their consolidated and non-consolidated pots as set out below.

2.7 Treatment of back-dated pensionable earnings

Currently, backdated pay is added to regular monthly salary to determine which contribution band a member falls within. The contribution rates applied are determined each month, based on a pro-rata of the annual threshold.

For payments made after 01 September 2020, backdated pay will not be included when determining contribution tiers. This is achieved by basing the pensionable earnings used to determine the contribution tier only on actual basic pay and any pensionable allowances. For avoidance of doubt, part-time workers will continue to have their salary threshold worked out using their actual pay, and not their full-time equivalent salary.

This contribution rate should be applied against all pensionable earnings paid in the period. For example, both salary, and any backdated pay.

3. Pay flexibility

The government wants to ensure that it is attracting the best and brightest to work for the Civil Service, and rewarding hard working staff fairly. Pay awards must ensure value for money for the taxpayer and it is important that they are cognisant of economic conditions. The government will take a robust and thorough approach to assessing cases for pay flexibility higher than 2.5% in 2020/21, particularly cases that seek flexibility for multiple years, and will only consider cases that realise cashable and sustainable savings and/or productivity and efficiencies very quickly within the business case lifecycle.

Pay flexibility guidance has been developed and will be circulated to Departments to help support any department wishing to develop such proposals.

Below is a summary of the types of business case that can be submitted:

• transformational workforce reform
• to address recruitment and retention issues
• transfer of funds from the non-consolidated pay pot to consolidated pay

Business cases for pay flexibility are subject to approval by Cabinet Office with subsequent sign-off by HM Treasury. In exceptional circumstances where Departments wish to take advantage of this flexibility are required to seek their own relevant minister’s approval before submitting their proposals using the pro forma found in the pay flexibility guidance. Departments must also get approval from their Permanent Secretary and Human Resources and Finance Directors.

The deadline for submitting pay flexibility proposals for 2020/21 is 31 January 2021.

This flexibility is also available to Non-Departmental Public Bodies who should submit proposals to the Cabinet Office through their relevant sponsor department’s Secretary of State.

3.1 Types of business cases

Transformational

Departments may seek to address transformational workforce reform. Such proposals will only be considered where there is a clear case that workforce reforms will generate real and cashable productivity and efficiency gains. Departments should discuss options with the Cabinet Office before formally submitting a business case.

Departments may, subject to approval by Cabinet Office and HM Treasury, introduce arrangements that enable capability based reward for growth in competence through development in role, as a way to achieve higher workforce productivity. Proposals that are akin to time-served pay progression or where departments are unable to sufficiently assess capability will not be considered.

Recruitment and retention

Departments, in exceptional cases, can seek pay flexibility to address specific problems associated with recruitment and retention in specific grades and professions within their department. These cases must include associated efficiencies and reforms to deliver sustainable savings going forward. Organisations must include robust evidence in support of pay proposals and the proposals must be strictly targeted and involve prioritisation.

The degree of labour turnover and recruitment deemed to be problematic will vary by Department and by grade and profession of staff. Departments will need to demonstrate that recruitment and retention problems severely risk service delivery, and the degree to which any turnover problems are associated with pay rather than other wider organisational factors.

Where Departments are citing staff motivation as a contributor to turnover, they must demonstrate whether these problems are associated with pay, for example, through evidence from surveys of staff and exit interviews. Departments should expect to be challenged on whether alternative measures are more appropriate to address the issues they have identified

Transfer of funds from the non-consolidated pot to consolidated pay

Departments and NDPBs have in previous years been permitted to reduce their non-consolidated performance related pay (PRP) pot permanently as a percentage of consolidated pay-bill be permitted to offset agreed increases in pay-bill costs applied to meet targeted recruitment or retention pressures. From 2019/20 onwards departments may use this flexibility to use address pay anomalies.

The permitted reduction in the PRP pot is capped at an amount equivalent to 50% of the pot, or 0.5% of the baseline paybill if smaller, in order to ensure that departments maintain sufficient resources to continue to fund non-consolidated performance arrangements. PRP pots may not be reduced to provide additional funding for the consolidated pay-bill generally (for example to fund an across-the-board increase in excess of 2.5%), but must be targeted to address recruitment and retention pressures or pay anomalies.

Funding remaining within the ring-fenced PRP pot following an agreed reduction is expected to be applied to performance-related payments. To avoid this flexibility resulting in subsequent paybill increase, the reduction in the PRP pot will be permanent once the pot as a percentage of pay-bill has been reduced. Departments must be satisfied that their proposed reduction will not jeopardise the operation, development or effectiveness of their performance-related pay arrangements.

3.2 Business case assessment

When submitting a business case departments must demonstrate they have considered and met the following headline principles throughout their proposals:

• Transformational and targeted: Proposals must deliver long-term focused transformational changes to departmental delivery and therefore significant improvements in productivity and/or resolve specific problems encountered by Departments;
• Delivers efficiencies and productivity: Delivers cost-neutral savings and efficiencies to the pay bill which cover the increased Increase in Remuneration Cost (IRC) by the end of the period of flexibility, and provide sustainable workforce productivity gains;
• Evidence-based: Demonstrate low levels of pay that are below relevant comparators and how this has translated into significant recruitment and retention problems (including relevant statistics) and robust evidence that the pay discrepancy will have a front line impact on business delivery;
• Measurable: Timelines and milestones must be provided to enable the tracking of the pay reform to ensure savings and impacts are being achieved;
• Coherence: Proposals may take into account wider Civil Service context and, departments may decide it is appropriate for them to look towards more consistent approaches and policies. In particular business cases are encouraged to look at where historic divergence between departments makes reward systems more complex, less agile, less fair to employees and less value overall to the taxpayer.

In submitting proposals, departments should be clear on whether increases in line with the NLW and statutory holiday pay entitlement are included within the headline pay award. Additionally, in the case of multi year proposals, departments should be clear on whether the offer will be negotiated with trade unions on a yearly basis, in each year of the deal, or all years of the deal upfront.

4. Pay remit process and approval

4.1 Responsibilities

Cabinet Office and HM Treasury

Cabinet Office has responsibility for the overall management of the Civil Service. It is responsible for publication of the Civil Service Pay Remit guidance and ensuring that it is affordable and flexible enough for all relevant departments to apply within their budgets. It works with departments and agencies on their workforce and reward strategies to encourage them in implementing tailored reward strategies that are consistent with their workforce and business needs, ensuring they are able to attract and retain talent to deliver government’s priorities and world class public services.

HM Treasury has overall responsibility for the government’s public sector pay and pensions policy, and maintaining control over public spending including with regards to departmental spending.

Departments

Departments have responsibility for implementing Civil Service pay policy for their workforce in a way that is consistent with the Civil Service pay guidance but also reflects the needs of their business and their labour market position. All pay remits must be approved by a Secretary of State or responsible minister, and each department, through its accounting officer, is responsible for the propriety of the pay award to staff.

Trade Unions

Departments are responsible for negotiating the annual pay remit with their recognised trade unions in line with the delegated pay framework. As a matter of course, departments are encouraged to work constructively with recognised trade unions on the development of their overall pay, reward and workforce strategies, including annual pay remits and the development of pay flexibility business cases.

Once the annual pay remit has been agreed by the relevant Secretary of State, departments can enter into formal negotiations with the trade unions. If departments require guidance or advice about what constitutes ‘formal negotiation’, they should contact the Cabinet Office.

4.2 The remit process

Approval

Departments, NDPBs and Agencies are required to submit a short business case to their relevant Secretary of State or appropriate Minister for approval. The only exceptions to this are those departments that are the direct responsibility of HM Treasury ministers and those for which there is no relevant Secretary of State, as set out in section 8. Their remits will continue to require HM Treasury ministerial approval, as with other departments that are the direct responsibility of HM Treasury ministers. These organisations are detailed in section 6.

No further approval from Cabinet Office or HM Treasury is necessary unless specific arrangements or requirements are already in place, or a department is looking to implement a pay award outside of the remit set by this guidance (such as a pay flexibility business case) at which point they should contact Cabinet Office and refer to the guidance in section 3.

Business case to the Secretary of State

Departments should ensure that clearance is sought from the relevant HR and Finance, Directors and Permanent Secretary prior to submission to the Secretary of State. Secretaries of State should consider the proposals against the following criteria:

1. Departments need to demonstrate that their proposed pay remit is affordable within departmental budgets or through savings generated as a result of further flexibility in line with the guidance at section 3;
2. The requirements in section 3 of this Guidance must be met
3. The business case should cover, where relevant:

• information on how the business case is consistent with the department’s overall workforce, pay and reward strategy
• information on the makeup of the department’s workforce, and the internal and external labour market in which they operate
• the relevant local labour market in which staff operate
• the recruitment and retention situation within the workforce
• Equality Act requirements to avoid discrimination, including the need for departments to meet their obligations under the Public Sector Equality Duty, and to record their findings on this.
• the total reward of staff, including pensions and conditions of service
• any structural changes or reforms to pay arrangements
• information on how the department is meeting key long term priorities, if the award is over 2% and up to 2.5%.

Departments should also work constructively with trade unions on the development of their overall pay and reward strategies and may find it helpful to discuss proposals with trade unions as these are developed. Following approval from the relevant Secretary of State, departments should enter into formal negotiations with their departmental trade unions. However, if during subsequent negotiations with Trade Unions there are any significant deviations from those proposals, then these need to be reported to the Secretary of State, Cabinet Office, or HM Treasury as appropriate, before any final agreement is reached. Any department that is uncertain as to whether what they propose to agree constitutes a significant difference from that specified under the remit should contact the Cabinet Office for advice.

Pay settlement changes are expected to apply from the settlement date upon which the department’s pay remit year commences, and not deferred.

4.3 Legal considerations for departments

Departments are reminded of their obligation to comply with their Public Sector Equality Duty when considering pay awards for their staff.

Where appropriate, departments are also expected to apply this guidance alongside the HM Treasury guidance on public sector pay and terms.

Departments are encouraged to take legal advice on the drafting of any pay commitments to ensure that these are affordable and consistent with this guidance.

Ministerial approval of pay remits is given on the basis that a department does not enter into any legally binding agreements in Trade Union negotiations that effectively commit it to automatic costs in the future.

4.4 Senior staff

Senior civil servants and NDPB equivalents are not included within the Civil Service pay guidance. However, senior staff have an important leadership role in demonstrating the need for pay decisions to follow public sector pay policy.

5. Pay reporting to HMT

In return for the continued delegation of pay to Secretaries of State, departments are expected to provide data to HM Treasury on their forecast and outturn data for the pay round.

Departments are asked to submit these data using the Workforce and Pay Remit (WPR) application in OSCAR for each remit as soon as they are approved, but in any case by 30th September 2020 (if necessary on a provisional basis in the first instance).

Failure by a department to provide appropriate data, or provide it in good time, may result in re-imposing the requirement for approval of remits for that department in future years or other action to encourage better compliance.

The information below summarises the data that departments are expected to report to HM Treasury for the 2019/20 remit year:

Each department should submit data covering the department itself, each non-ministerial department falling within the area of responsibility of their Secretary of State, each agency that they sponsor and each NDPB. Departments should not in general combine data relating to separate remits. Exceptionally, aggregate data may be entered for NDPBs with prior HM Treasury agreement.

The data required is outturn for 2018/19 and 2019/20, and a forecast for 2020/21. Outturn data should be consistent with published resource accounts (allowing for differences arising from the financial year basis of the latter) and forecasts, including any forecast changes to staff in post, should be consistent with the in-year expenditure forecasts that all central departments routinely provide to HM Treasury via the OSCAR system. Data must be provided for the delegated Civil Service grades, and not combined with Senior Civil Service data or data for Senior Civil Service equivalent grades. The OSCAR system makes provision for the separate collection of data relating to the Senior Civil Service. HM Treasury will provide guidance in due course with regards to Senior Civil Service or Senior Civil Service equivalent grades. Data should be provided for the year of the pay remit, not the financial year.

If there are significant anomalies in the data, for example because it represents less than a full year of activity, or there are large differences between successive forecast and outturn figures for a particular year, departments should provide a brief explanation, either in the space provided on OSCAR or in an email to the Workforce Pay and Pensions team at HM Treasury (see section 7 for contact details).

HM Treasury will issue a commission directly to departments to formally begin the WPR process. This will include all relevant guidance and information.

6. Departments requiring HM Treasury approval

Those departments that are the direct responsibility of HM Treasury and those that do not have a Secretary of State with the authority to determine pay, should submit their annual pay remit to HM Treasury for approval.

The list detailed below comprises those departments that are the direct responsibility of HM Treasury ministers, and will therefore be signed off by HM Treasury ministers in the same way that other departments will be signed off by their own Secretary of State.

Departments that are the direct responsibility of HM Treasury ministers:

• HM Treasury
• HM Revenue and Customs
• Government Actuary’s Department
• National Savings and Investment
• Valuation Office Agency
• Debt Management Office
• Office for Budget Responsibility

The second group compromises departments where there is no Secretary of State with the authority to determine pay:

• Government Communication Headquarters
• Secret Intelligence Service
• The Security Service

7. Contacts

Any queries in relation to this guidance, or the remit process in general, should be addressed to the Cabinet Office in the first instance:

The Workforce Policy and Reward Team - The Cabinet Office
Workforce Policy and Reward team
4th Floor
151 Buckingham Palace Road
London
SW1W 9SZ
civilservicepay@cabinetoffice.gov.uk

Workforce, Pay and Pensions Team – HM Treasury
Workforce Pay and Pensions Team
HM Treasury, Zone 2 Red
1 Horse Guards Road
London SW1A 2HQ
civilservicepay@hmtreasury.gsi.gov.uk

8. Glossary of terms

8.1 Total paybill (£ million)

Total paybill: The template calculates total paybill as the sum of direct wages and salaries, pension contributions and National Insurance Contributions. Includes all staff-related costs excluding the cost of staff not on the formal Civil Service payroll, comprising direct wages and salaries, employer pension contributions and employer National Insurance Contributions. This should include staff paid from programme budgets.

Direct wages and salaries: The template calculates direct wages and salaries from the sum of pay, allowances, non-consolidated performance (e.g. bonuses) and overtime entered in the OSCAR template. Direct wages and salaries include all the elements that go to employees on a current basis (as opposed to pension payments, for example, which are deferred).

Pension contributions: Enter the total cost to the department of pension contributions. Employer National Insurance Contributions: Enter the total cost to the department of employer National Insurance Contributions.

Exit costs: Enter the exit costs. These include any benefits to an individual, in the form of pay, pension or other remuneration, when leaving service (through either compulsory redundancy or other agreed departures) other than entitlements accrued in the normal course of employment up to and including the exit date.

8.2 Non-paybill staff costs (£ million)

Consultants/interim/agency staff costs not included in the paybill: Enter the total cost of all staff who are not on the formal Civil Service payroll, including for example, consultants, interim and agency staff.

8.3 Non-consolidated performance pay pot (% of paybill)

Non-consolidated performance pay pot (% of paybill): Enter the size of the non-consolidated performance pay pot expressed as a percentage of total pay-bill. Note that this may differ from outturn or forecast expenditure on non-consolidated pay recorded as a component of salaries and wages.

8.4 Paybill per head (£)

Paybill per head: The template calculates two measures to show the total paybill divided by the workforce size. Paybill per head (headcount) is total paybill divided by headcount. Paybill per head (FTE) is total paybill divided by full-time equivalent (FTE) workforce.

Average earnings per head: The template calculates two measures to show direct wages and salaries (i.e. pensionable pay – i.e. excluding employer pensions and NICs) divided by the workforce size. Average earnings per head (headcount) is direct wages and salaries divided by headcount. Average earnings per head (FTE) is direct wages and salaries divided by FTE workforce.

8.5 Workforce size

Please ensure that headcount and FTE are calculated on the required basis for all years, and if necessary enter revised figures.

Headcount: Enter the total Civil Service workforce on a headcount basis, calculated as the average for the remit year based on the size of the workforce at the end of each month.

Full time equivalent: Enter the total Civil Service workforce on a full-time equivalent basis, calculated as the average for the remit year based on the size of the workforce at the end of each month.

Number of exit packages: Enter the number of exit packages made within the year. This should relate to the ‘exit costs’ figure reported under paybill.

8.6 Wastage and vacancies (%)

Vacancy Rates: Enter the number of unfilled posts (or forecast vacancies) in the final month of the remit year in question, expressed as a percentage of (headcount at the end of the month plus vacancies). This figure should reflect the number of posts that are either unfilled or filled by contract staff, which will be advertised under Civil Service fair and open competition rules. This figure should not include vacant posts that will be removed as part of organisational restructuring or planned workforce reductions.

Staff wastage: Enter the proportion of employees leaving the department over the year (excluding redundancies but including exits due to all other factors including performance related exits and ill-health retirements) as a % of total workforce. Excludes those employees moving between jobs within the department.

8.7 Change in pay from previous year (%)

Basic award (%): Enter the average % increase to the steps (for a step based pay system) or maxima/minima (for a non-step based pay system) of the pay ranges within an organisation. Pay drift (%): The template calculates pay drift as the difference between average earnings growth % and basic award %.

Average earnings growth (%): The template calculates this as the change in average earnings per head (FTE) from the previous year, as a % of average earnings per head in the previous year. It includes all changes in direct wages and salaries.

Percentage increase in remuneration cost (IRC) (%): Enter the percentage change in the IRC. This is the difference between the projected remuneration cost and the baseline remuneration cost expressed as a percentage of the baseline remuneration cost. All departments should enter data for all three calculations of the IRC:

1. Increase in remuneration cost
2. Increase in remuneration cost excluding legally binding progression increments or progression buy out costs
3. Increase in remuneration cost excluding progression increments or progression buy out costs, and PRP pot switches

For those departments to whom the below do not apply, the figures will be identical:

• departments that pay contractual progression increments or
• departments who have agreed a switch in funding from the non-consolidated performance pay pot to fund recruitment and retention pressures

Those departments that fall under either or both of the above are expected to report the effects of these factors on their IRC by entering outturn and forecast data for all three versions of the IRC.

8.8 National Living Wage (NLW)

Number of employees on the NLW: The number of eligible employees that are on (or are within 5 pence of) the NLW from April in the pay remit year. For example, as of April 2020, the rate of the National Living Wage is £8.72.

Paybill costs of those on the NLW: The total paybill costs incurred by all employees on the NLW within the pay remit year and the cost of increasing the wages of eligible employees to meet the legal entitlement of paying the NLW.

8.9 Baseline remuneration cost

The baseline remuneration cost is the cost to the department, for the remit year, of the expected staff complement, excluding the costs of progression or revalorisation or any other increases. Baseline remuneration cost does not include employer national insurance and pension contributions.

8.10 Projected remuneration cost

The projected remuneration cost is calculated by adding the increase in remuneration cost arising from the remit proposals to the baseline remuneration cost.

Example: if the total costs of the remit proposals were £100,000 and the baseline costs were £2,000,000 the projected costs would be £2,100,000.

8.11 Increase in remuneration cost (IRC)

As stated in Section 3, the IRC includes all increases arising from the remit proposals, apart from employer National Insurance Contributions and pension contributions, and is net of any offsetting reductions in the costs.

The IRC calculation should assume that all increases are implemented from the settlement date. Departments cannot reduce the IRC by deferring the date of implementation of component increases.

8.12 Non-consolidated performance payments

Non-consolidated performance payments are awarded to staff based on performance either at an individual, team or organisational level. They are re-earnable and do not have associated future costs. Types of payment include:

• performance related payments based on individual contributions to the department and assessed by the Departments performance management system
• special bonus schemes for individual payments for special projects or outstanding pieces of work that are not covered by the normal performance management system
• Non-consolidated performance payments met from the performance pot should be excluded from the IRC calculation. However, non-consolidated payments not related to performance, as well as increases in the non-consolidated performance pot, must be included in the IRC calculation.

8.13 Calculating the performance pot

The organisation’s existing non-consolidated performance pot is a cash value derived from a percentage of the consolidated baseline paybill, and not a fixed cash amount.

Example: In 2019-20, an organisation has a consolidated paybill of £20 million and has built up a non-consolidated performance pot of 3%. The cash value of the non-consolidated pot is therefore 3% of £20 million, and so equals £600,000. In 2020/21, because of staff reductions, the consolidated baseline paybill is reduced to £19 million. While the non-consolidated pot as a proportion of consolidated paybill remains unchanged at 3%, the cash value is reduced to £570,000 (3% of £19 million).

8.14 Other non-consolidated payments

Non-consolidated payments other than those related to performance must be included in the IRC calculation.

8.15 Progression Pay

Progression pay systems are those under which pay to individuals in a specific grade or post increases periodically. Progression pay cost is the cost of moving someone through the pay range and in spine point or step based system relates to the costs of incremental steps. In some cases this is subject to demonstration of increased capability (to a particular standard), a satisfactory performance assessment and/or may be a legal entitlement. Progression may also be as a result of targeting a pay award. In milestone and reference-point based systems, progression means the cost of moving staff within the pay range.

8.16 Revalorisation

Revalorisation relates to the uprating of pay ranges, spine points or step based systems and is the value by which set points are increased. The cost of any revalorisation must be included in the pay award, ie the IRC calculation.

8.17 Non-pay rewards and benefits

These include increases in annual leave entitlements, reduction in working hours, etc. The cost of such changes should be calculated and included in the IRC calculation.

8.18 Non-paybill staff costs

This covers consultants/interim/agency staff costs not included in the paybill. It includes the total cost of all staff that are not on the formal Civil Service payroll, including for example, consultants, interim and agency staff.

8.19 Remit year

The period for which the approved pay remit applies. Remits apply for one year but the settlement dates, i.e. the date upon which the pay remit year commences, vary from one body to another.

8.20 Recyclable Savings

Recyclable savings are generated when staff leave the department and are replaced by entrants with a lower salary cost. The difference between the leaver’s salary costs and the entrant’s salary costs is the saving to the paybill.

Vacant posts do not generate recyclable saving, because until the post is filled the salary cost to the paybill cannot be determined.