Jul 2010 21

Yesterday at the Home Affairs Committee meeting, the issue of senior pay came up. Immigration Minister Damian Green said that 8.6 per cent of the entire Home Office pay bill was set aside for bonuses. This is going down to 4.4 per cent this year. Mr Green then went on to say that this means that the average pay for many Home Office officials would be cut. Makes sense – less money means less pay. Surely.

Well, not quite. Cutting the bonus pot is not cutting someone's pay. Bonuses are performance related, and do not constitute part of a worker's regular pay-packet. Keith Vaz, Chairman of the committee, rightly pounced on this straight away. "It's not a pay-cut, is it minister?" Mr Green replied "They'll get less money this year than last year, so it feels like a pay cut to them."

Enlightening. So these officials seem to be given bonuses regardless of performance. They would have got their bonuses this year had there been enough money to pay for them. MP for Cannock Chase Aidan Burley then stepped in to drive the point home to the minister: "Surely a bonus is not compulsory…If you're not performing and therefore not entitled to a bonus, that doesn't count as a pay cut." Quite right.

If we're to really get to grips with public sector pay, it's not just raw numbers that need to be looked at. There's clearly a culture-change required in most bodies and departments. Yesterday's Home Affairs committee session proved that. Just as a side-note, the BBC have reported the story this morning. Although they headline with "Bonuses amid Pay Freeze", they say in response that Damian Green said cutting bonuses was effectively a pay-cut. However, no mention of Mr Vaz and and Mr Burley stepping in to correctly rubbish this assertion.

John is the Director of the TaxPayers’ Alliance, overseeing the work of the research, grassroots, campaign and media teams

  • http://www.attractorconsulting.com Vince Lammas

    Bonuses shouldn’t be taken for granted – period!
    However this principle applies at the Home Office no more than the private sector – where CEOs and bankers still benefit from enormous bonuses irrespective of organisational performance.
    Bankers bonuses are currently underpinned by taxpayers financial support which stopped them disappearing and us suffering in the maelstrom of their making.
    For many relatively low paid employees in both public and private sectors, the annual bonus can be really significant – though it probably doesn’t stretch to pay for another sports car.
    Anyone taking home less this year than last experiences a real terms cut in earnings. Distinguishing “pay” from “bonus” is pretty meaningless when it comes to employers’ costs or people’s spending power.
    Employees performing well expect to earn their bonus in the same way people working extra hours expect to earn overtime pay – that’s the deal.
    I am sure TPA is not against performance pay in principle or suggesting bonuses are never really earned.
    While many are calling for an extension of performance pay in the public sector, bonuses aren’t the best way of motivating people to work smarter or harder.
    Good leadership and management is always far more effective in the long term.

  • The Uncivil Servant

    So if cutting bonuses isn’t cutting somebody’s pay, that means increasing bonuses (as the government has done over the last decade) shouldn’t count as a pay rise.

  • Paul

    @ The Uncivil Servant
    Of course increasing bonuses doesn’t count as a pay rise – and that’s exactly the reason bonuses have been used more, it keeps pensionable pay down!
    Departments are saying that your intrinsic value (wage) is worth less than before (inflation etc) – and that your worth only increases with better performances (bonuses).
    If a large part of your wage is in bonuses, make sure to make large contributions to your pension fund to make up for it.

  • http://www.cheapstocredits.net/ sto credits

    For many relatively low paid employees in both public and private sectors, the annual bonus can be really significant – though it probably doesn’t stretch to pay for another sports car.