This Commons Library Briefing Paper discusses public sector pay policy and the pay freeze announced in Spending Review 2020. It also looks at past public sector pay policy and trends in public sector pay.
Public sector pay (2 MB, PDF)
According to the Office of National Statistics, around 5.5 million people are employed in the public sector in the UK.
Pay awards are determined in different ways for different parts of the public sector:
On 25 November 2020, the Government published Spending Review 2020. As part of the response to the economic impacts of the COVID-19 pandemic, the Chancellor announced that public sector pay will be “paused” for 2021/22. There will be an exemption for NHS staff. In addition, workers earning below £24,000 will receive a pay rise of at least £250 (although for some this could still represent a pay cut in real terms).
This policy is only directly binding on the Civil Service and parts of the public sector that are covered by the PRBs. Public sector pay policy is reflected in the remits that are issued to the PRBs and Government departments.
Ministers have sent remit letters to each of the eight PRBs for the 2021/22 pay round. With the exceptions of the letters to the NHS Pay Review Body (NHSPRB) and the Review Body for Doctors’ and Dentists’ Remuneration (DDRB), each of the letters say that the Government is not seeking recommendations for those earning above £24,000.
The letters to the NHSPRB and DDRB ask for recommendations on pay awards, taking into account the economic context. On 4 March 2021, the Department for Health and Social Care published evidence to the NHSPRB and DDRB which said that the Government was assuming a headline 1% pay award for NHS staff and doctors. The announcement was criticised by various groups, including the British Medical Association and the Royal College of Nursing.
The Local Government Association, which represents the employer side in the National Joint Council, has said that it is not bound by this pay policy but that pay awards will depend on the funding that local government receives through the financial settlement.
In 2010, the Coalition Government announced a two-year pay freeze from 2011/12. Following cuts to local government funding, local government workers were subject to a three-year pay freeze.
From 2013/14 to 2017/18 public sector pay awards were capped at an average of 1%.
This policy was lifted in 2017 and from 2018/19 to 2020/21 the parts of the public sector that are covered by the PRBs received pay rises above 2%.
The Trades Union Congress has criticised the constraints that were in place from 2010, arguing that they led to a “decade of lost pay”.[1]
Average pay is higher in the public sector than in the private sector. At April 2020, median weekly earnings for full-time employees were £647 in the public sector compared to £567 in the private sector.[2] [3] However, public sector workers tend to be older and more highly-educated than for the private sector as a whole, so after controlling for differences in workers’ characteristics, the gap in pay is much smaller.
Before 2020, this gap had been decreasing since 2012, as pay increases were more positively skewed in the private sector than in the public sector. However, the coronavirus pandemic had a larger negative impact on the pay of private sector employees, so this trend reversed in 2020.
[1] TUC, Key workers: Decent pay and secure work for key workers through coronavirus and beyond, 14 September 2020
[2] All the figures in this section refer to employees only. The primary sources of earnings statistics do not include self-employed workers.
[3] Office for National Statistics, Annual Survey of Hours and Earnings, 2020
Public sector pay (2 MB, PDF)
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