Guidance

Civil Service Pay Remit Guidance 2026 to 2027

Published 21 May 2026

1. Introduction

Individual government departments and agencies have delegated authority to decide on pay and conditions for their workforces below the Senior Civil Service. These choices must be made within the delegated framework and controls set out in the Civil Service Pay Remit Guidance. The overall aim is to ensure a framework in which departments and agencies covered by the Pay Remit Guidance set their pay for their staff. 

The 2026/27 financial year is designated as a critical foundation year, marking the initial, concrete steps in a multi-year, long-term journey to reform the Civil Service reward framework. Changes to the complex, established structures governing Civil Service pay cannot be achieved in a single year, but work must start somewhere. 

2. Scope and purpose of the pay remit guidance

This guidance covers pay setting arrangements for civil servants throughout the Civil Service, including: Ministerial Departments, Non-Ministerial Departments, and Agencies.

It also covers public sector workers in Non-Departmental Public Bodies^{[footnote 1]} and Arm’s Length Bodies^{[footnote 2]}.

• Where reference is made to departments it also includes those organisations outlined that are not ministerial departments but are in scope of the Pay Remit Guidance. Additionally, where reference is made to civil servants it also includes references to other workers employed in organisations covered by this guidance. 
• Any calculations must only take into account workers under scope of the Pay Remit Guidance.
• Any questions or queries around a department’s classification and scope within the remit guidance can be directed to Cabinet Office contacts in Section 6.

This guidance is the framework within which all departments will set pay for 2026/27, develop departmental pay strategies, and ensure pay reporting. Additionally, this guidance sets out the contextual factors, the overall Civil Service pay strategy, the headline pay figure, any additional flexibilities and how to implement those, and the arrangements for seeking pay flexibility above these figures. 

While this guidance sets the pay framework for 2026/27, this is the first stage in a longer term, transformational journey to reform reward in the Civil Service. This guidance reflects our direction of travel and the start of a wider programme on which reform will be built over the coming years. 

This guidance does not apply to departments which are already in approved arrangements outside of the Pay Remit Guidance, including those for which multi-year deals extending into the 2026/27 pay year have been agreed. A glossary of terms used in this guidance can be found in Section 7.

3. 2026/2027 Pay remit headline award and encompassing factors of the pay remit guidance

3.1 Introduction

The Increase to Remuneration Cost or IRC is the standard measure of the paybill changes in a department and refers to an overall budgetary value, not to individuals’ pay. More details are given at Section 3.2. For 2026/27 the IRC is set at a maximum of 3.5% within which departments will determine how to target their pay award based on workforce and business needs. The IRC does not confirm the amount that an individual in a department will receive and individuals may receive a higher or lower award than the IRC. 

Departments are encouraged to factor in their longer term workforce and reward objectives, including wider workforce priorities they are required to address over the current Spending Review period. Departments have flexibility to target their pay awards in a way which best suits their workforce needs, including any specific anomalies. Departments may wish to consider how to utilise their pay award to align on cross-government issues, particularly where that may reduce the internal market for skills. In exceptional cases, Departments may consider use of a pay flexibility case.

Departments must ensure pay awards are affordable within agreed spending settlements, and be aware of the need to balance other budgetary pressures, with consideration of the wider economy and the Government’s macroeconomic framework.

3.2 Increase in Remuneration Costs (IRC)

Departments are reminded that all elements which increase paybill cost must be included in the calculation of a pay award, except employer National Insurance contributions and employer pension contributions. This includes, but is not limited to, the following:

• re-valorisation of paybands
• 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/rewards (e.g. increasing annual/sick/maternity/paternity/parental leave entitlements, introducing long service or non pay recognition awards)
• increases arising from pay restructuring (e.g. associated with machinery of government changes or repositioning staff within the pay range)
• salary sacrifice schemes^{[footnote 3]}.

3.3 Exceptions to Increase in Remuneration Costs

There are some exceptions when calculating Increase in Remuneration Costs:

• Legislative requirements - all statutory requirements should be met outside of the Increase in Remuneration Costs.^{[footnote 4]}
• National Living Wage - from 1 April each year, 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 met outside the department’s pay remit.
• Optional Scottish Bank Holiday - the cost of the 2026/27 optional Bank Holiday in Scotland, if offered in a department, can be met outside the department’s pay remit.
• Buying and selling annual leave schemes - to be extended for 2026/27 Civil Service Pay Remit Guidance to include the buying of annual leave. Changes in costs associated with this scheme will be offset against changes in productivity. Departments should consider statutory holiday entitlement when implementing the scheme.
• Costs associated with employee benefits from the cross government benefits framework - costs associated with employee benefits from the cross government benefits framework or a departmental benefits framework (unless it is a new salary sacrifice benefit).
• Recyclable savings from salary sacrifice schemes - Employer National Insurance and pension contributions saved as a result of salary sacrifice schemes, where such schemes are permitted by HM Treasury, are recyclable savings and can be offset against the IRC of a 2026/27 pay award.

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. 3.5%, then further approval is required from HM Treasury Ministers.

Departments should contact the Cabinet Office for advice if they are unsure whether any changes they are considering would present an increase in remuneration costs. 

3.4 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 paybill. Departments have the flexibility to apply non-consolidated performance awards either in-year or end-year, or both. With the agreement of HM Treasury and the Cabinet Office, departments have the option of transferring money between their consolidated and non-consolidated pots as set out below in Section 4.2.

Requests to increase the size of the non-consolidated performance pay ‘pot’, permanently or temporarily, will only be considered in exceptional circumstances. Consideration of this change will be dependent on factors including the current size of a department’s non-consolidated performance pay ‘pot’ and the proposed increase, as well as the justification for change. If a department’s non-consolidated ‘pot’ has been recently reduced to fund higher consolidated pay, further requests will not be considered.

3.5 Broader Reward Tools to Incentivise Performance, Delivery and Skills Growth

Further work continues to be developed as part of the longer-term Civil Service Reward Strategy. As part of this we are exploring all models of reward, both non-consolidated (see Section 3.4) and consolidated in the Civil Service. 

This work is part of our ambition to drive performance and skills development across the Civil Service. To ensure the Civil Service can be as operationally efficient as possible, we must look for innovative and flexible approaches to incentivising delivery. 

We will not consider pay flexibility cases for 2026/27 on capability-based pay or performance-based pay, however we are interested in ideas from reward practitioners from across the Civil Service on pay systems that use either performance, skills, experience, or the acquisition of qualifications in order to support government delivery or drive forward the Future Civil Service programme.   

These systems must not include automatic time-served progression, and must not create contractual entitlements. Departments must discuss any ideas with the Cabinet Office and HM Treasury to inform how these ideas could inform the longer-term reward strategy. 

4. Pay flexibility

The Government wants to ensure that it is attracting the best and most talented to work for the Civil Service, valuing delivery and rewarding hard working staff fairly. It is important that pay awards ensure sustainability of public finances, deliver value for money for the taxpayer and consider economic conditions. Departments should also consider how their long-term pay strategy delivers on workforce priorities and efficiencies. 

This year, the IRC is set at a maximum of 3.5%.  There is an expectation that departments target reform in addition to making base pay increases. Departments who do not use the IRC for targeted reform but submit a pay flex business case must justify why the IRC was not used for reform. Exceptionally a department may wish to consider making a business case for pay flexibility where it can demonstrate higher pay awards in return for efficiency and productivity benefits to the department.

Cabinet Office and HM Treasury will only consider requests from departments for pay flexibility proposals by exception and where all within-remit options have been fully exhausted. Departments must ensure it meets the requirements set out in section 4.3. Departments considering a request for pay flexibility must contact the Pay and Reward team in the Cabinet Office, employmentreform@cabinetoffice.gov.uk, to discuss their case before submission. 

The deadline to submit a case for the 2026/27 remit year is no later than 31 October 2026.  Departments are asked not to wait until this deadline to submit a case and are free to start submitting cases from the date of publication of this guidance. Cases submitted at or near the deadline risk being considered more slowly if there is a high demand. Early engagement is key to understanding issues of substance and to agree the efficient assessment of cases. 

Where departments request pay flexibility, cases should be cost neutral in the medium-term with details to be set out in a business case. This means that any additional costs should be offset by delivering savings, which may include tangible productivity and efficiency gains. Proposals will be considered where savings and efficiencies to the paybill which cover the IRC can be met within the business case lifecycle or in the medium-term.

Pay remits can only be reopened in exceptional cases once the relevant Secretary of State has approved them, and once approval is received from the Chief Secretary the Treasury. Departments must engage with the Pay & Reward team in the Cabinet Office to discuss the proposal’s viability before submitting their request.  

Departments may be able to make an interim award within the pay remit whilst awaiting the outcome of a pay flexibility case. Departments must seek approval from the Cabinet Office prior to implementing an interim award.

4.1 Pay Flexibility Process

As outlined above, cases for pay flexibility will only be considered where:

• Accounting Officers (advised their HR Directors, and Finance Directors) in the department are engaged on, and supportive of the proposals.
• Relevant Secretaries of State or Ministers agree that the department meets the Pay Flexibility criteria in Section 4.3.
• The business case is submitted to the Cabinet Office and HM Treasury no later than the deadline of 31 October 2026.
• Departments should not make a pay award for their workforce, unless approval to make an interim award has been agreed. Approval for this should be sought from Cabinet Office officials. Accounting Officers should ensure that any interim award made does not affect the affordability of the pay case or exceed the headline award permitted by this guidance and would not result in overpayments to individuals in the event that Cabinet Office and HM Treasury reject the pay flexibility proposals; and
• Any pay arrangements proposed do not involve automatic time-served progression pay, or create an entitlement for employees to receive automatic incremental pay increases.

As part of Project Reset, we have reduced the number of Ministerial approval stages required. All business cases will now only be subject to approval from the Chief Secretary to the Treasury, unless it is a small value business case.

Small-scale business cases (see Section 4.2.5) may be approved via a streamlined official-level approval process to improve the speed of the business case process. HM Treasury reserves the right to seek Chief Secretary to the Treasury approval for any cases that are novel or contentious to ensure accountability for sensitive financial decisions.

4.2 Types of Business Case

4.2.1 Recruitment and retention

Departments may seek targeted pay flexibility to address specific problems associated with recruitment and retention in specific grades and/or professions within their department. These cases must include associated efficiencies and reforms to deliver sustainable savings going forward. Departments must include robust evidence in support of pay proposals and consider the wider current economic and labour market context. Proposals must also 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 (with robust relevant data) that recruitment and retention problems are exceptional and severely risk service delivery, and the degree to which any turnover problems are associated with pay rather than other wider organisational factors (include internal criteria on percentage figure for employee turnover and unfilled vacancies/contingent labour reliance).

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. Departments can also consider a business case to adopt the Government Digital & Data pay framework to address specific recruitment and retention challenges (see Section 4.2.6).

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

Departments and NDPBs are permitted to reduce their non-consolidated performance related pay (PRP) pot permanently as a percentage of consolidated paybill to offset agreed increases in paybill costs applied to meet targeted recruitment or retention pressures, and to address pay anomalies.

PRP pots may not be reduced to provide additional funding for the consolidated paybill generally (for example to fund an across-the-board increase to staff), 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 paybill 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.

Requests to increase the size of the non-consolidated performance pay ‘pot’, permanently or temporarily, will be considered in exceptional circumstances. If an organisation’s non-consolidated PRP pot has been recently reduced to fund higher consolidated pay, further cases will not be considered.

4.2.3 Transformation

In previous years, departments have been able to submit proposals for transformational pay reform. Departments may seek to take forward transformational pay reform to address acute or longstanding organisational or structural issues, to ensure the continued delivery of vital public services and support delivery of workforce reform. This may include pay restructuring which is necessary as a result of Machinery of Government changes.  

In these cases, proposals will only be considered where there is a clear case that reforms will generate transformation in departmental and public service delivery, and are expected to be offset by delivering sustainable savings, which may include tangible productivity and efficiency gains. This may include, for example, reduction in contingent labour, savings from reduced turnover, recyclables, changes to terms and conditions of employment, or other productivity and efficiency savings.

Departments should also consider delivery of Spending Review priorities when formulating a business case.

Departments must discuss options with the Cabinet Office before formally submitting a business case. The assessment of a business case will take into account the individual circumstances of the department.

4.2.4 Pay Compression Framework

The Cabinet Office has been discussing pay compression issues with relevant departments for their AA - EO grades and equivalents. These issues impact departments differently and a specific Pay Compression Framework has been developed with the relevant stakeholders to address these challenges. 

Departments experiencing these issues may submit a pay flexibility business case designed to address compression, either individually or jointly. 

If successful, the costs of the reform will be considered above the pay remit in line with the pay flexibility process, however HM Treasury will require confirmation of the total cost of all proposals. Departments must fund this reform within existing spending envelopes in return for meeting specific reform conditions. Adoption of the framework is voluntary and departments will need to assess impacts within their departments, and work with trade union representatives based on departmental arrangements. 

Departments wishing to apply for the Pay Compression Framework will need to demonstrate their pay compression challenges up to and including EO and how they will mitigate these challenges through the framework. They must also set out their future workforce plans for AAs, including plans to provide clear career advancement paths for AA colleagues. 

4.2.5 Targeted Workforce Flexibility (Small-Scale Business Cases)

This year, in order to support smaller and specialist cases, organisations with a business case that will affect fewer than 500 FTE staff e.g. a small organisation or a particular specialist group, at an additional IRC less than 1% above the permitted headline IRC for that group only, should contact the Pay and Reward team in the Cabinet Office when considering a case in order to discuss proportional assessment.

These business cases can be approved by officials (at SCS level) and will not require ministerial approval which should improve the speed of the approvals process. 

4.2.6 The Pay Framework for Government Digital & Data, and for Cyber Staff

Departments will continue to submit a business case to the Cabinet Office for approval to adopt the Government Digital, Data and Cyber Pay Framework (“the GDD framework”). The framework enables departments to pay capability-based allowances to recruit and retain staff in hard to fill Digital, Data and Cyber roles. The framework roles are taken from the Government Digital and Data Capability Framework, and the Cyber Profession, which are also used to support annual capability assessments.  

Business cases to adopt the GDD framework are funded outside the headline pay remit, usually by recycling savings from reducing contingent labour use (although cases with clear evidence of future cost-avoidance might also be approved). Departments should discuss options, and agree their business case with the reward team in Government Digital Services (GDS). The cost of paying allowances under the framework does not count towards the calculation of the IRC. 

Approval of business cases to adopt the GDD framework has been delegated to Government Chief People Officer (GCPO) or equivalent, where roles align with the agreed profiles within the Government Digital and Data Capability Framework and Cyber Profession.

Departments looking to adopt the framework should discuss their business case with the reward team in GDS, contacting them at Digital.Pay@dsit.gov.uk.

4.2.7 Pay Settlement Date Adjustments

Where departments wish to move their pay settlement dates back to 1 April, HM Treasury and Cabinet Office are content to consider a pay flexibility business case. 

Departments that wish to consider this should contact the Pay and Reward team in Cabinet Office, employmentreform@cabinetoffice.gov.uk, in advance to discuss how this may work for their individual circumstances.

4.3 Business Case Assessment

Requests for pay flexibility will be considered where departments can incorporate a set of principles throughout their proposals.  These are Evidence-based, Transformational and targeted, Deliver efficiencies and productivity, Measurable, Coherent, and Equality.

Departments making business cases must adhere to these principles:

4.3.1 Alignment to Government Priorities

Departments who are considering pay business cases should reflect on how their proposal will align with Government priorities and cross-government issues, particularly where they may reduce the internal market for skills. Additionally, business cases should evidence mechanisms that have already been used to try to address the key issues within the case, and explain why the current and previous pay awards have not been ample to mitigate these issues.

4.3.2 Evidence-based:

Proposals should also provide evidence that demonstrates expected efficiencies and savings resulting from the duration of the pay deal. There must be robust evidence in the form of data to back up the proposals.

Proposals must also demonstrate clear evidence that the pay flexibility will have a front line impact on business delivery, outcomes, and productivity (as applicable).

• Recruitment and retention: proposals should demonstrate low levels of pay that are below relevant comparators and how this has translated into significant recruitment and retention problems (including relevant statistics) that severely risk service delivery, and the degree to which any turnover problems are associated with pay rather than other wider organisational factors.

4.3.3 Transformational and targeted: Proposals should address specific problems associated with the business case type.

• Transformational workforce reform: proposals should deliver long-term focused transformational changes to departmental delivery. Proposals must consider how a pay strategy may support delivery of Spending Review workforce priorities, deliver productivity and efficiency gains and savings including through changes to terms and conditions of employment, and other recyclables.
• Transfer of funds from the non-consolidated pay pot to consolidated pay: Proposals should demonstrate that funds are being targeted to address workforce issues. 

4.3.4 Delivers efficiencies and productivity:

Proposals are expected to demonstrate and deliver sustainable productivity and efficiency savings which cover the Increase in Remuneration Cost, so as to be cost neutral in the medium-term and not place a cost pressure on the department’s budget. All cases must be affordable within existing budgets.

• Transformational workforce reform: Proposals should be accompanied by a holistic workforce strategy including detail on how proposed reforms will enable workforce targets to be met,in addition to the sustainable and measurable workforce productivity gains.
• Transfer of funds from the non-consolidated pay pot to consolidated pay: Proposals should demonstrate that the proposed reduction of the non-consolidated pay pot will not jeopardise the operation, development or effectiveness of their performance-related pay arrangements.

4.3.5 Measurable:

timelines and milestones must be provided to enable the tracking of the pay reform to ensure savings and impacts are being achieved.

4.3.6 Coherent:

proposals must 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 has made reward systems more complex, less agile, less fair to employees and less efficient overall to the taxpayer.

4.3.7 Equality:

Compliance with equality legislation, and ensuring an equality impact assessment has been undertaken when developing proposals. The business case should show due regard to equality. 

5. Pay remit process and approval

5.1 Responsibilities

5.1.1 Cabinet Office and HM Treasury

Cabinet Office has responsibility for the overall management of the Civil Service. It is responsible for the publication of the Civil Service Pay Remit Guidance and ensuring that it is sufficiently affordable and flexible 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 that they are able to attract and retain talent to deliver the 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 who have previously been granted clearance can continue the paybill control system going forward. HM Treasury will continue to keep the use of paybill control under review and will not consider new proposals this remit year.

5.1.2 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, including their obligations as set out in Section 5.3.

5.1.3 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 formal negotiations with the trade unions. If departments require guidance or advice about what constitutes ‘formal negotiation’, they should contact the Cabinet Office.

5.2 The Remit Process

5.2.1 Approval

Departments, NDPBs and agencies are required to submit their pay remit proposal, specifically the amount and proposals on how the award is split across eligible employees, any terms and conditions amendments etc, to ensure alignment with departmental/ and Secretary of State priorities to their relevant Secretary of State or appropriate Minister for approval. The only exceptions to this are Government Communications Headquarters, the Secret Intelligence Service and the Security Service where there is no Secretary of State with authority to determine pay. Their annual pay remits will continue to require HM Treasury ministerial approval.

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 4.

5.2.2 Pay flexibility business case to the Secretary of State

Where departments have decided to submit proposals for pay flexibility, departments should ensure that clearance is sought from the relevant HR and Finance Directors, and then Accounting Officer prior to submission to the Secretary of State.

Secretaries of State should consider whether proposed pay flexibility is affordable within departmental budgets and through savings generated as a result of further flexibility in line with the guidance at Section 4.

The requirements in Section 4.3 of this guidance must be met. 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, and Spending Review priorities.
• 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.

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 they are developed. Following approval from the relevant Secretary of State, departments should enter 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 must be reported to the Secretary of State and, as appropriate, Cabinet Office or HM Treasury 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 should not be deferred.

5.3 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 and the requirements of the HR Functional Standard (including adherence to all legal and regulatory requirements).

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.

5.4 Senior staff

Senior Civil Servants (SCS) and NDPB equivalents are not included within the scope of this Civil Service Pay Remit Guidance. The pay of the SCS is covered by the Senior Salaries Review Body’s (SSRB) remit and is set centrally by the Cabinet Office. Pay for senior staff in NDPBs is not covered by the SSRB’s remit. Nevertheless, NDPBs have an important leadership role in following public sector pay policy and, therefore, any annual pay increase or decision to award performance-related pay to such staff must be considered alongside and according to the same principles that apply to the SCS. Sponsor departments are responsible for enforcing this. The latest SCS Pay Practitioners Guide can be found on gov.uk.

6. Contacts

Any queries in relation to this guidance, or the remit process in general, should be emailed to the Cabinet Office in the first instance: hrpolicy.gpg@cabinetoffice.gov.uk

7. Glossary of terms

7.1 Direct wages and salaries

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).

7.2 Paybill 

Paybill, for the purpose of calculating the pay remit, includes the sum of direct wages, salaries, and overtime rates, while excluding employer pension contributions and National Insurance contributions. Includes all staff-related costs but excludes the cost of staff not on the formal Civil Service payroll and not included within the PRG’s paybill calculation - see Section 7.11.

7.3 Baseline remuneration cost

The baseline remuneration cost is the cost to the department, for the remit year with the expected staff complement, before applying the pay award. Baseline remuneration cost does not include employer National Insurance and pension contributions.

7.4 Increase in remuneration cost (IRC)

The IRC calculates the pay remit proposals against the baseline remuneration cost.

As set out in Section 3, the IRC includes all increases arising from the remit proposals, including costs from any current system of progression-based pay or capability-based pay. Increases to overtime rates are also included. The only factors excluded from the IRC are employer National Insurance contributions and pension contributions, and is the net of any offsetting reductions in these costs. 

Example: if the total costs of the remit proposals were £200,000 and the baseline costs were £20,000,000 the projected costs would be £20,200,000 or a 1% IRC.

7.5 Non-consolidated performance payments (as referenced in section 3.4)

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 department’s performance management system.
• Special bonus schemes of 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 and are non-pensionable but still subject to National Insurance contributions 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.

The non-consolidated performance pay pot is a fixed percentage of a department’s baseline paybill and included within their paybill but not as part of the IRC, unless it is being increased.

For example: An organisation has a paybill of £20 million and has a non-consolidated performance pot of 1%. The cash value of the non-consolidated pot would be £200,000.

7.6 Other non-consolidated payments (as referenced in Section 3.2)

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

7.7 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; for spine point or step-based systems, it 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.

7.8 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 IRC calculation.

7.9 Non-pay rewards and benefits (as referenced in Section 3.2)

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.

7.10 Remit year and settlement date

The remit year is the period for which the approved pay remit applies to. The settlement date is when the award is applied from the commencement of the remit year and the IRC figure does not reduce if the award is implemented later.

7.11 Non-paybill staff costs 

Consultants, interim, and agency staff costs are not included in the paybill.

1. 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 implies otherwise, and departments should seek clarity as necessary. ↩

2. Organisations should contact their parent or sponsor department to seek guidance from the Cabinet Office (contact details found in Section 6) if unsure whether they are in scope of the guidance. ↩

3. A letter from the Financial Secretary to Secretaries of State on 3 November 2009 clarified the rules on salary sacrifice schemes in the public sector. Departments should refer to this if needed. ↩

4. For Neonatal leave, departments also have the flexibility to apply occupational pay for entitled employees for this period. ↩