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The pressure of public scrutiny is increasing on senior, well-paid individuals in all areas of work after a Freedom of Information request. Concerns have arisen that senior public servants have been abusing their position by working in ways that are “tax efficient” and thereby inappropriate.

At a time when high pay in the private sector has been a matter of concern, it was pretty obvious that arrangements for senior positions in the public sector would soon come under increased scrutiny and calls for transparency.

With news emerging the Student Loan Company’s chief executive, Ed Lester had his salary paid through a personal service company (a legal framework with no direct employment relationship and tax advantages), the Coalition Government’s focus on reducing tax avoidance has been called into question.

Personal service companies are generally accepted as perfectly legal and legitimate mechanisms for many independent contractors to work with client organisations. This arrangement can be entirely legitimate and suit both parties, particularly where the contractor works independently with multiple clients and where permanent or direct employment is not appropriate. Such companies can be an effective way for contractors to work and have certain tax advantages.

Tax legislation generally prevents such arrangements being abused as, where HMRC takes the view the working relationship is one where direct employment is the “real” situation, the contractor would normally be liable for PAYE and National Insurance in the normal way.

This is managed through the application of IR35, introduced in 2000 with the aim of eliminating inappropriate tax avoidance behaviour and generate tax revenue.

Since the introduction of IR35, tax lawyers have expressed concern that HMRC have been “bashing” truly independent contractors and entrepreneurs with this legislation to raise revenue rather than tackling real tax evaders.

Initially at least, there has been no suggestion the particular case in question has been put in place illegally and no details about the tax treatment of the arrangement have been disclosed, though it has been suggested “tax authorities” had approved it. The SLC has apparently defended the arrangement, producing figures suggesting it was saving the organisation around £88k over two years by avoiding head hunters fees, and tax and national insurance contributions. Commentator have highlighted potential financial benefits of between £25k and £40k for Mr Lester.

Across the public sector, Attractor is aware there is, generally, a strong focus on ensuring appropriate treatment of employment and contractor relationships. Perhaps this is why the judgements made in this case have been called into question. From the details published, it seems the arrangement had been approved at a pretty high level and there may be some suspicion that pressure from politicians had swayed the decision.

With increased focus on the issue, Danny Alexander, the Chief Secretary to the Treasury has ordered an investigation to see if the practice is widespread across government. It will be interesting to see the results of the investigation and it’s certain there will be increased effort to ensure the tax treatment for all senior appointments has been as “clean” as possible.

This might require a change to payment mechanisms and employment relationships or, more simply, a quiet word in the ear of the taxman.

During conversations with Attractor’s associates and partner organisations, ideas are being explored about how to build and support effective interventions for NHS client organisations, helping them deliver on the huge service change pressures they are facing. Some are focussed on developing a positive culture and this is part of every successful organisation. In the NHS however, managing culture is especially challenging – there are so many people who “part-belong” or who only temporarily “belong” to each NHS organisation.

Even were it simple, balancing cultural conformity and innovation can be difficult in a time of substantial change. Get the culture wrong – expect people to live by a prescriptive set of values – and you can stifle change and adaptation when it’s most needed. Surely in an organisation that truly values diversity, it should be OK to hold and voice disagreements without fear of being singled out as “a trouble-maker”, or simply being “resistant to change”.

Attractor has been involved in many conversations recently about the challenge of engaging staff members in the NHS.  There is quite a consensus that effectively engaging the workforce can be a vital ingredient for delivering high quality care, positive health and broader business outcomes.

All that people need do then is engage! Obviously it’s not that simple however and many consider it requires a significant adjustment in the culture of NHS leadership and management.

• Withhold and Uphold – Secrecy and control are the preferred strategy – saying nothing until absolutely necessary. Ignore the rumours and abandon influence.
• Spray and Pray -  Management  shower employees with all kinds of information – simple but confusing
• Identify and Reply - Allow employees to identify concerns and respond to them. Stresses listening to people even when they don’t identify key issues.
• Tell and Sell – Communicate a set of messages that address core organisational issues, the decisions and direction of travel
• Underscore and Explore – Focus on several fundamental issues clearly linked to organisational success. Allowing employees  freedom to explore the implications of those ideas. Listen and respond.

On the  ”All About HR Forum” on LinkedIN, members were recently asked what one practical action would improve engagement and the consensus was “talking to people”. Having front-line teams routinely talk about performance and improvement in the workplace – encouraging managers to regularly meet with and talk to team members (individually and collectively) is important – but it probably isn’t enough! Engagement is a “two way deal” – it involves the exchange of commitments. Read the rest of this entry →

In 2011, public sector cuts are a universal phenomenon and it seems the anticipated reductions in NHS staffing levels would result in an overall reduction from 1,432,000 to somewhere around 1,380,000 by 2015. As the Telegraph’s David Hughes point out, a reduction of 50,000 jobs does sound high, but is a relatively small proportion (3.5%) of the NHS workforce and will be managed over a number of years.

The Telegraph article needs one, small, correction. At this new, lower staffing level would become the world’s fourth largest employer behind Wal-Mart, the Chines Army and Indian State Railways – having been temporarily ahead of the Indian Army for around a decade.

David Hughes is correct in suggesting it would be possible to manage the anticipated scale of moves through “natural wastage”. Managing the required change in this way sounds good in principle but is only possible if the cuts happen to be in the same places as people moving on.

Experience suggests real life is rarely that simple and there are, now, thousands of people at risk of redundancy – a position that might and that position is likely to remain constant for about 2 years.

When reading the Telegraph article, it is interesting to contrast its “matter of fact”  tone with the more alarmist one in another article in the Telegraph just a year earlier when similar challenges were being considered by a government of a different political persuasion – though it’s fair to reflect the article discussed the possibility of a 10% reduction in staffing.

Organisations facing these pressures will need to be far more proactive in delivering the changes needed.

Photo: srqpix, Flickr

The Coalition Government is apparently considering changes to employment law – pushing the qualification period for protection against unfair dismissal up from one year to two years. While this represents a reversal of employment law changes which took effect in 1999 – taking the UK back to the position before the last Labour government – they are also considering the introduction of a fee to discourage vexatious claims.

Business representatives, such as the British Chamber of Commerce, often suggest current arrangements are too one-sided – soft on employees – causing huge expense for employers in defending cases. Deregulation in this area will boost jobs, they say, though the TUC express the view that increasing burdens on dismissed employees would be objectionable – preventing people from bringing legitimate claims.

The TUC also reject the idea employment tribunal cases are running out of control, reporting a 14% rise in individual claims during 2009/10 – a figure which, in the context of the economic slowdown and resulting job losses doesn’t sound too alarming.

While the idea of making changes which are “pro-business” seems sensible, comments on Laurie Anstis’ Work/Life/Law blog suggest there are plenty of pragmatists out there who think the impact of such a change is likely to be marginal and many concerns it will simply encourage employers to act sloppily.

The BBC investigation last year provides interesting facts and some balanced perspectives – especially the points that employers need not deploy expensive legal representation to handle tribunals and that half of cases defended by employers in 2009 were won (though this seems like a case of a glass half full?).

So is a change in the law going to have an impact? Read the rest of this entry →

On the back of the Comprehensive Spending Review (CSR), government departments are challenged to make significant savings to their back office functions. The government has set an expectation of a 34% reduction in administrative costs across government with a savaing of £5.9bn per year.

The CSR plans for Department for Education, Ministry of Justice, Foreign Office, the Home Office, Cabinet Office and Department for Culture, Media and Sport have all set ambitious targets for administrative savings by 2014-15.

External commentators have commented that these targets will be hard to meet, Deloitte suggesting cutting costs by 20% was “extremely hard” and delivering more that 25% for private or public sector, would be “exceedingly difficult”.

It is clear the public sector will have to identify and implement new ways of working to deliver back office functions such as finance, human resources and IT services with substantially less resources. Read the rest of this entry →

At a time when public services are under pressure to save money, its not surprising more local authorities are considering the potential benefits of creating shared service solutions.

Members of Scotland’s Clyde Valley Community Planning Partnership (CVCPP) – West Dunbartonshire, East Dunbartonshire, Inverclyde, East Renfrewshire, Renfrewshire, Glasgow, North Lanarkshire and South Lanarkshire – are working together on a programme.

Similarly, the London boroughs of Westminster, Hammersmith and Fulham, and Kensington and Chelsea propose merging many of their front-line services. The three councils’ will receive a feasibility report on the possible merger in February 2011.

Statements reported in the press about the CVCPP scheme suggest the programme is looking at savings of arond 20% and the London boroughs have talked about savings of £100m though these both seem likely to be the kind of generalised modelling and targets discussed in the early stages of most shared services projects rather than a carefully worked-up figure using real data on proposed solutions.

In principle, the potential savings from shared front-line services ought to be significantly larger than shared back-office – simply because of the proportion of organisational expenditure in those areas (back-office functions typically costing a small percentage of  total revenue) but the delivery of savings is no more certain.

Read the rest of this entry →

With the Coalition Government revealing the outcomes of it’s Comprehensive Spending Review, the scale and pace of reorganisations across the public sector are becoming apparent.

The range and scale of reform envisaged in the CSR is immensely challenging and doubts are being expressed in mainstream media and new media alike. The balance of opinion suggests delivery will be all but impossible and failure in the attempt will have serious negative consequences.

There is no denying the ambition of the programme and the need for dramatic change is emphasised by the government’s statement that it is commencing “a radical programme of public service reform … [which] will change the way services are delivered by redistributing power away from central government and enabling sustainable, long term improvements in services.”

While spending in front line services such as health and schools are somewhat insulated from the financial pressures, the administrative budgets of central government departments are to see reductions of 34%. Taking anticipated changes in Council Tax into account, local government will see reductions of around 15% over the next four years with police and fire services experiencing reductions of 14% and 13% respectively.

That degree of saving will be spectacularly challenging and it’s clear the programme require more fundamental change than slicing small amounts of activity from many small programmes and budgets.

How should work proceed? Read the rest of this entry →

The House of Commons Fees Office has been drawn into another expenses news item, though this one relates to the fraudulent actions of an official in the payment office. Andrew Gibson, a Resources Budget Officer created fake expense claims to pay off gambling debts.

The crooked official submitted false invoices for secretarial services against the names of Tam Dalyell, Linda Perham and Matthew Green, MPs who were retiring or otherwise leaving their constituencies following the General Election of 2005.

During that year, Gibson made three payments totalling £5,875 into the bank account of his friend Toni Pomfret, both of whom had worked with the post office.

The discrepancies with the payments came to light as a result of the general investigation into MP’s expenses. Mr Dalyell alerted the police when a claim he did not recall submitting was examined . Gibson and Pomfret’s fingerprints were detected on the claim forms.

Having both pleaded guilty, Gibson was jailed for nine months and Pomfret for six months.

The BBC’s Panorama programme entitled “Because We’re Worth It” explored the issues of top public servants pay, the recent government interventions and perceived value for money.

While the programme included a pretty superficial session where members of the public ranked public servants value in Trafalgar Square, it also contained some valuable insights into factors driving earnings for top public servants.

BBC researchers used the Freedom of Information Act to collate earnings information for over 38,000 top public sector roles and have published the data on their website.

The BBC explained it’s research revealed some enlightening facts about the pay of top public servants including the following -

• 220 civil servants earned more than the Primer Minister
• 385 teachers earned more than £100k and 17 headteachers earned more than the Prime Minister
• 97 people at the BBC earned more than £160k
• 428 quango heads earned more than the Prime Minister
• the highest paid local government CEO earned £299k

Attractor has said before it is pretty meaningless to compare public servants earnings to those of the Prime Minister. Career politicians and other public servants inhabit different environments. Other commentators have highlighted the pay of senior politicians excludes the potential external earnings available in this field, before, during and after their elected service.

Panorama also highlighted the fact the Prime Minister’s pay had been reduced by both Gordon Brown and David Cameron from £197,000k to £142,000 over the last 18 months. Reducing pay in this way significantly shifts the number of top public sector roles that attract earnings above the Prime Minister …. from less than 1,000 to over 9,000.

While this sends a clear political signal on national pay restraint, and responds to similar moves made in some areas of the private sector, expecting this to translate across public service was probably no more realistic than expecting all private sector CEOs to take pay cuts.

So what else did the programme and the BBC data reveal? Read the rest of this entry →