Experience of Simplifying and Decentralising Pay and Grading Administration
77. Alongside performance-based pay, the second key thrust of pay and grading reform has been decentralisation and simplification. As we have already described under previous headings, all of our survey countries have, to varying degrees, decentralised their pay arrangements to individual Departments and Agencies, operating within a centrally determined policy framework. The key features have been as follows:
· Giving considerable freedom to Departments and Agencies to develop and manage their own pay systems
· Subjecting departmental freedoms to strict affordability and budgetary constraints, together with centrally determined pay policies and negotiating parameters
· Continuing to manage senior civil servants separately (and centrally)
· Taking steps to simplify systems of allowances by consolidating or abolishing existing allowances and making them non-accountable (i.e. everyone in the job entitled to the allowance will automatically receive it).
78. While it is difficult to find definitive, independent evidence, these trends do appear to have contributed to real improvements in both individual performance and overall Civil Service productivity, primarily by:
· Better gearing pay systems to the particular circumstances of each Department and Agency
· Providing a fairer way of rewarding people (providing the underlying systems are themselves fair and applied consistently)
· Providing more flexibility to meet resourcing needs
· Simplifying arrangements so they are easier to understand and cheaper to administer
· Better equipping Civil Service Departments and Agencies to compete for scarce skills or staff in high demand.
79. However, pay decentralisation is certainly not a panacea. It has become evident that the decentralisation of pay has also created some potentially important problems and risks that need to be recognised and managed:
· Problems of internal relativities between staff doing similar or identical work in different Departments/Agencies. For example, the UK has recently found that differences of 10% or more in pay have arisen for similar or identical jobs in different agencies, creating some tensions and a sense of pay ‘drift’
· Difficulties where (as in the UK and Australia) the Government wishes to combine or merge Departments which now have very different pay arrangements
· Threats to the overall coherence of the Civil Service in the sense of having a common purpose and set of values
· The need to ensure that overall budgets are tightly controlled to avoid unexpected expenditure increases, particularly in the transition period.
80. In parallel with the decentralisation of pay described above, most of the countries we surveyed have also implemented major changes to their grading arrangements. The exception to this has been Canada, although a major grading review is now in progress there in response to increasing criticism over the costs and effectiveness of the current system. The key common features adopted in the four other reference countries include the following:
· Giving Departments and Agencies more autonomy in grading issues (and, indeed, human resources management more generally)
· Departmentalising general grades personnel (sometime with the exception of the Administrative Service or its broad equivalent)
· Rationalising the number of ranks and the number of pay ranges to create a smaller number of broader pay bands. This has generally created flatter management structures with staff able to pass through broad pay bands on the basis of performance, without requiring a formal promotion process
· Combining occupations into broad staff groupings. For example, the Singapore Government has grouped together several of the schemes of service for particular occupations into a combined scheme of service
· Establishing formal job evaluation systems and procedures for assessing job weighting. In some countries – such as the UK and Canada - these systems have remained centralised (but applied locally); in others – for example, New Zealand – this responsibility has been devolved. More recently some countries are exploring greater use of competency-based approaches as an alternative or supplement to job evaluation
· Growing away from educational qualifications as the primary determinant of rank or grade, relying instead on a broader assessment of job demands.
81. Generally, it appears that grading reforms have been welcomed. For the Governments concerned and senior managers, these reforms have provided much needed flexibility and scope for increasing efficiency. But there have also been major benefits for staff by providing greater opportunities for career development, particularly for those who have reached the top of their existing pay scales. The establishment of formal job evaluation processes has also been seen as a fairer means of assessing the relative value of different jobs, and is important from the point of view of equal opportunities policy – an area of particular concern to a number of the Governments we surveyed.
82. The main concern expressed about grading reform and decentralisation has been the need to avoid major increases in costs as a result. For example, in Canada, long awaited grading reforms have been delayed due to concerns about cost implications, given the fact that, like Hong Kong, a high percentage of the Canadian Civil Service have already reached the top of their pay scale and there are concerns as to the ability and willingness of senior civil servants to effectively manage this situation.
Implications for Hong Kong
83. It is generally acknowledged that Hong Kong has a complex Civil Service pay and grading system. Given this, and the international experience summarised above, we believe that there is merit in examining the scope for further decentralisation and simplification of pay and grading in the Hong Kong Civil Service. In doing so, the key questions to be addressed will include the following:
· How much additional pay and grading responsibility should be delegated to Bureaux and Departments and on what basis should any such delegations apply (e.g. voluntary or negotiated)?
· The justification for retaining separately accountable allowances, other than in very special circumstances?
· What scope is there to amalgamate existing grades within broader occupational categories?
· Should some or all of the current general grades staff be departmentalised?
· What is the scope for introducing broader pay bands to reduce the number of ranks and what measures would be needed to ensure continued transparency and expenditure control?
· Should a formal job evaluation system be introduced and, if so, should this be operated centrally or on a devolved basis?
· Is there further scope for extending the use of competency-based approaches and how should such approaches tie in with any job evaluation scheme?
