Tue, 1 Mar 2011

Controversy ongoing, despite Capita’s freeze on exec pay

Public sector outsourcing specialist Capita has frozen the base salaries of senior managers and played down any hopes of significant pay rises for its 37,000 staff. However, bonuses and stock options continue to boost earnings among bosses.

The base salary for Paul Pindar, chief executive of the group, whose services include payroll bureaux, was frozen at £375,000. However, performance-related bonuses boosted his total remuneration by 17% to £901,360. He also exercised options worth £479,565 and £343,572, the Financial Times reported.

Although a private sector company, Capita specializes in running outsourced contracts for the public sector, so pay rises are politically controversial at a time of budget cutbacks. Included in its range of services are HR shared services and managed payroll.

This prompted Mark Serwotka, general secretary of the Public and Commercial Services Union, to complain: ‘It ought to be a national scandal that these people are making vast sums when their profits are largely dependent upon the taxpayer.’ His union has 30,000 members who work for outsourced contractors.

Potential future bonuses for senior managers at Capita may rise. The firm announced that performance-related bonuses could rise to 170% of salary this year and to 200% by 2012. Capita’s executive pay is low compared with peers on the FTSE 100, it said.

A spokesperson for Capita said: ‘We are unable to provide further information about the salaries of Capita Group employees; however, we can confirm that salaries across the group reflect an individual’s role and the skills needed to perform it. Capita’s chief executive and senior executive’s performance-related pay reflects their skills in helping to grow Capita from a company that employed just 34 people and paid £200,000 in UK tax in 1987 to one that today employs 37,000 and contributes nearly £700m.

‘Capita delivers real economic value to both private and public sector clients. Despite this, our chief executive’s remuneration remains in the lowest 25% of FTSE 100 chief executives.’

Councils vote to lower pay in face of cuts

Southampton City Council’s recent vote on staff wage reductions has been passed in an attempt to protect jobs – a method other local authorities are considering adopting in the face of the Government’s budget cuts.

The wage reductions work on a sliding scale, with those earning less than £21,000 per year actually gaining £250, and reductions imposed on salaries of £17,000 and above increasing from 2% to 5.5%.

Announcing the decision, the Leader of the Council, Councillor Royston Smith, said the move would save 400 jobs. ‘Most of the council’s expenditure goes on its staff,’ he said, ‘so getting these terms and conditions changes through is the only realistic way of preventing more staff from losing their jobs.’

But unions have rejected the decision. They highlight an unfairness in the sliding scale of cuts whereby those earning £22,000 will see a 4.5% fall in their salary of £1,000, while council chiefs will only drop by 1% more to 5.5% – so a wage of £173,000 will fall by just £9,500.

Southampton Unison branch secretary Mike Tucker told Payroll World: ‘It’s a permanent cut – the council aren’t doing it temporarily because of an adverse financial situation – and it will have an effect on people’s pensions.’ Tucker warned that if union members rejected the deal and the council pursued its plan, it would be forced to dismiss and re-engage the entire workforce, and face fines from the unions.

Neighbouring Portsmouth City Council is considering a similar approach, and confirmed that its employment committee is currently in discussion with unions over a percentage pay reduction.

In January, council staff in Aberdeen rejected a pay cuts package of 5% for staff earning more than £21,000, while in the same month Blackpool Council signed a deal with trade unions to amend pay terms and conditions and save 100 jobs, only to then announce hundreds of redundancies.

But Gerwyn Davies, Chartered Institute of Personnel and Development public policy adviser, said: ‘Many private sector employers opted to take pay cuts during the recession, and many are now reporting the benefits of having held on to skilled staff and having higher levels of employee engagement.’