Written by Juan Novoa, Director of Consulting

Following the publication of the 2024-2025 Civil Service Pay Remit Guidance (or ‘pay remit’ to be brief) earlier this week, there are important things to discuss.

In this post I bring attention to 3 of the most notable points from the government’s announcement covering the opportunities it brings, the challenges around affordability, and restrictions on additional flexibility.

5% Cap

First, it’s the headline figure of 5% that sets the cap for average pay awards. This figure reflects the recommendations from Pay Review Bodies and has been generally welcome as it marks the first instance of (potential) above-inflation pay increases for a number of years.

With a higher budget, comes higher responsibility for its fair and equitable allocation. The 5% figure provides some headroom to target investment in employee groups that need it, whilst being able to protect the purchasing power of salaries across the board. This opens up possibilities of addressing pressing gaps to market rates and/or fixing anomalies, among other interventions that can improve the effectiveness of pay.

The key aspect to keep in mind here is that any differentiation of pay increases should follow clear rules, consistently applied and properly communicated. Otherwise, this will be a missed opportunity to have a positive impact on employee engagement.

Affordability

Second, that 5% cap will put pressure on affordability. Organisations need to fund these increases from their current budgets which, in many cases, are already under pressure.

The 5% pay remit figure will be seen by many as a target, not necessarily a cap. Expectations will be shaped accordingly. Trade unions and other stakeholder groups will be pushing for organisations to make full use of these resources. As such, public sector bodies covered by the pay remit will either have to scramble to find the money to meet these expectations, or have a very clear narrative to explain decisions for increases below the 5% mark.

Cases For Pay Flexibility

Third, this year’s pay remit makes it very clear that the bar for business cases for pay flexibility will be set even higher than it has been in the past. The pay remit states that “… cases for pay flexibility will only be considered in very exceptional circumstances.”

In practice, this means that business cases for pay flexibility are unlikely to be successful unless there’s strong evidence of material risks to service delivery emerging from pay constraints. And even then, the road to approval is likely to be very difficult.

The one exception to this is business cases seeking approval to adopt the Digital & Data Pay Framework. Where roles and structures align to the pre-agreed Digital and Data Pay Framework, departments will be able to submit a business case, without the need for HM Treasury ministerial approval. This will allow them to implement capability-based allowances to recruit and retain staff in hard to fill digital and data, and cyber roles – funded outside the pay remit.