Standard Operating Procedure

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1 MARKET SUPPLEMENTS (Authority/Police Staff) Standard Operating Procedure Notice: This document has been made available through the Police Service of Scotland Freedom of Information Publication Scheme. It should not be utilised as guidance or instruction by any police officer or employee as it may have been redacted due to legal exemptions. Owning Department: Version Number: People and Development 2.00 Date Published: 10/10/2016 Version 2.00

2 Compliance Record Equality and Human Rights Impact Assessment (EqHRIA): Date Completed / Reviewed: Information Management Compliant: Health and Safety Compliant: Publication Scheme Compliant: 04/06/2014 Yes Yes Yes Version Control Table Version History of Amendments Date 1.00 Initial Approved Version 02/10/ Minor changes to nomenclature contained within the document such as PSoS to Police Scotland and Human Resources to People and Development. SOP has been formatted onto new corporate template 10/10/2016 Version

3 Contents 1. Purpose 2. Aim 3. Scope 4. What is A Market Supplement 5. Calculation of Market Payment 6. General Provsions 7. Applying a Market Supplement The Procedure 8. Stage 1: Investigating Recruitment and / or Retention Problems 9. Stage 2: Analysing the Market Data 10. Stage 3: Formal Consideration of the Case 11. Review Stage 12. Monitoring 13. Roles and Responsibilities 13.1 Chief Superintendent/Head of Department and HR Business Partner 13.2 People and Development Pay and Grading Team 13.3 SPA/Police Scotland Pay and Reward Committee Appendices Appendix A Appendix B Appendix C Appendix D Appendix E List of Associated Legislation and Guidance List of Associated Forms List of Associated Reference Documents Glossary of Terms SPA/Police Scotland Criteria and Process for Applying Market Supplements Version

4 1. Purpose (b) (c) The Scottish Police Authority (SPA) and Police Service of Scotland (Police Scotland) are committed to the principle of equal pay for work of equal value and operate a robust analytical job evaluation scheme to measure the relative value of all Authority/Police Staff jobs. This Standard Operating Procedure (SOP) supports the SPA/ Police Scotland Pay and Reward Policy. Nonetheless, it is acknowledged that on occasion the total reward package determined by the SPA s interim pay and grading structure may not be consistent with reward packages offered for comparable posts in the wider labour market, and that this may lead to recruitment and retention difficulties. In such circumstances, where there is a clear business need supported by objective market data, and where other measures have proved ineffective, SPA/ Police Scotland will consider offering a market supplement payment in addition to the normal reward package for the post. SPA/ Police Scotland will make such payments only in exceptional circumstances and to follow a clear and consistent framework for the determination of any market supplement payment which: ensures that SPA/ Police Scotland meets their obligations under equal pay legislation and maintains the overall integrity of its pay and grading structure; allows market supplements to be considered only where a clear and demonstrable business need exists; ensures that other non-pay issues are fully explored before a market supplement payment is considered; permits market supplement payments where an objective assessment of appropriate evidence supports this approach and a rationale is recorded; sets out the process by which cases are considered, and the conditions that will be applied; requires all market supplement payments to be reviewed on a regular basis and varied or removed where necessary; and includes a process for all payments to be monitored and also ensures that they are included in equal pay audits. 2. Aim This SOP articulates the process to be followed in the consideration and application of market supplements. 3. Scope This SOP applies to all prospective and existing Authority/Police Staff. Version

5 4. What is a Market Supplement? A market supplement payment is an addition to salary and other benefits for a specific individual post, or a group of posts. It is paid, in exceptional circumstances, where higher pay rates offered by other employers (the market rate) prevent SPA/ Police Scotland from being able to recruit or retain staff on the salary indicated for their role. The total reward package (basic salary plus all other benefits e.g. pension contributions, annual leave) will be considered when making comparisons. Please refer to the Glossary in Appendix D. Such payments apply to posts on a temporary basis and will be subject to annual review. Where there ceases to be an organisational need or market justification for a supplement, the post holder(s) will be given three months written notice, after which time the payment will be withdrawn. 5. Calculation of Market Payment The People and Development Pay and Grading Team will review the current total reward package and compare against the objective market data, calculating the market supplement by subtracting the total reward applicable to a post from what is deemed to be the market pay for comparable positions in the appropriate external labour market. For the purposes of the SOP total reward is the combination of financial and non-financial rewards appropriate to a post and is split into three component parts: 1. Basic pay established from the pay and grading structure; 2. Additional visible payments such as allowances, overtime, and employer pension contributions; and 3. Employee benefits such as sick pay, maternity leave, holidays, flexible working, work-life balance arrangements etc., cycle to work. This list is not exhaustive and there will be an element of judgement in assessing the value of other financial and non-financial benefits. 6. General Provisions (b) Market supplement payments may be granted on a fixed-term basis where there is clear evidence that recruitment and retention difficulties are caused by the total reward rate (see Glossary Appendix D) being too low, relative to that offered by other employers for comparable posts. Chief Superintendents/Heads of Departments, supported by HR Business Partners must adequately consider and implement non-pay solutions to recruit and retain staff before a market supplement will be considered e.g. ensure all ancillary benefits have been fully promoted to the incumbent or prospective candidate for the post. Market supplements will be calculated as a fixed cash amount, the value of which will be reviewed annually and may result in the supplement being varied or withdrawn. The appropriate level of a supplement will be determined by calculating the difference between the SPA s total reward rate (including the Version

6 value of any allowances and other benefits) and the total reward market rate (see Glossary Appendix D), as determined by evidence from appropriate sources. The market rate will normally be used when calculating market supplement payments, established from recognised, independent salary surveys such as Hay Pay Net, Income Data Services or professional publications. (c) (d) (e) Market supplements are awarded in relation to specific posts. Therefore, where it is agreed that the payment of a market supplement is appropriate, it will normally apply to all identical posts. In the case of a single occupancy post, a vacancy arising will provide a timely opportunity to review the post, its grade and remuneration before going to the recruitment process. Where an employee who is in receipt of a supplement moves to another role within SPA/ Police Scotland that does not attract such a payment, the supplement will cease from the date they take up their new post. There is no right of appeal regarding decisions taken to offer, refuse, vary or withdraw a market supplement. 7. Applying a Market Supplement The Procedure (b) Where significant difficulties are experienced in recruiting or retaining staff in a role, the following procedure, described in Sections 8 to 10, can be used to assess whether a market supplement payment is justified for a role. A key requirement of this procedure is that market supplements will only be considered once other ways of improving recruitment and retention have been exhausted and market pay is evidenced to be the main issue. Please refer to Appendix E for more detail on the considerations that should be tested before putting a business case together for section one of the Market Supplement Application form. This form is available from People and Development (P&D) 8. Stage 1: Investigating Recruitment and / or Retention Problems (b) (c) Where recruitment and/or retention problems have been experienced, or there is significant evidence that this will be the case, the relevant Chief Superintendent/Head of Department should consult with their HR Business Partner and investigate the cause(s) of the problem, recording the findings on the Market Supplement Application form ( ). The Chief Superintendent/Head of Department and their HR Business Partner should discuss whether any improvements can be obtained by offering or making applicants/employees more aware of the overall reward package (e.g. final salary pension scheme, training and career development opportunities, flexible working arrangements, access to a range of policies that support worklife balance etc.). If non-pay approaches have proved ineffective and the evidence suggests that the normal reward package offered might be uncompetitive, the Chief Superintendent/Head of Departments, in discussion with their HR Business Version

7 Partner, should compile relevant evidence using the 'Stage 1' section of the Market Supplement Application Form ( ) and submit this to the P&D Pay and Grading Team. Investigation and analysis of relevant external pay data will then be undertaken in order to determine whether a market supplement might be appropriate. 9. Stage 2: Analysing the Market Data (b) The P&D Pay and Grading Team will be responsible for identifying and analysing relevant labour market pay data in order to establish whether justification exists for the payment of a market supplement. The sources from which this data is gathered will vary depending on what is relevant for the particular post under examination. However, data from a minimum of two reliable sources will usually be required (Hay Pay Net, Income Data Service) supported by professional publications, where possible. The results of these investigations will be recorded using the 'Stage 2' section of the Market Supplement Application Form ( ). If the evidence established indicates that the total reward rate is equal to or lower than the value of the total reward package offered by Police Scotland, a market supplement will not be appropriate and the HR Business Partner will work with the Chief Superintendent/Head of Department to identify other underlying recruitment or retention problems and the most appropriate ways of overcoming these. Where market pay investigations have established evidence to confirm that the market pay rate is significantly higher than the reward package offered by the SPA/ Police Scotland, the P&D Pay and Grading Team may recommend the use of a market supplement. Recommendations will be made using the 'Stage 2' section of the Market Supplement Application Form ( ). 10. Stage 3: Formal Consideration of the Case (b) (c) Where evidence established at Stages 1 and 2 of this procedure indicates that a market supplement payment may be a reasonable and proportionate response to recruitment and retention difficulties, the resulting recommendations will be formally considered by the SPA/ Police Scotland Pay and Reward Committee (PRC). The PRC is chaired by the Chief Executive of the SPA and will also include the Director of People and Development (Police Scotland), the Director of Financial Services (Police Scotland) and the Director of HR Governance (SPA), who would all be voting members. The P&D Pay and Grading Team will retain a record of all cases that have been considered including a decision register that records why applications have been approved or refused. Should a recommendation be approved, a market supplement payment will be established, taking the form of: Version

8 an ongoing payment in addition to salary for a specified period of time, normally one year. Such a payment will also be subject to employer pension contributions; and the market supplement will be calculated by subtracting the Total Reward appropriate to the position from the market rate established from comparable positions in the appropriate external labour market. (d) (e) (f) (g) All employees entitled to a market supplement will be provided with a written statement detailing the amount of supplement, its duration and the review periods that apply. Further particulars and contracts of employment will identify market supplements as a distinct and separate element of pay, specifying the duration of the supplement. Supplements will be paid through the normal salary system, but will be identified separately from the base salary in documentation and records, including payslips. Market supplements will be subject to National Insurance, PAYE income tax and pension deductions. Market supplements will be taken into consideration in the calculation of all statutory entitlements such as sickness, maternity support, adoption leave and redundancy. Similarly, any occupational entitlements to sickness, maternity support, adoption, redundancy, allowances and overtime will also take account of market supplements. Employees in receipt of a market supplement will continue to progress incrementally through the normal pay scale appropriate to their grade and salary. Similarly, cost of living allowance (COLA) will only apply to the base salary determined by the pay and grading structure. Such pay increases will be taken into consideration whenever the market supplement is reviewed. See Appendix E, SPA/ Police Scotland Criteria and Process for Market Supplements. 11. Review Stage (b) (c) The review process follows a three-stage procedure similar to that detailed above. Market Supplement Application Review Form ( ) (available from P&D) will be followed each time the supplement is due for review. Market supplement payments will be formally reviewed on an annual basis by the SPA/ Police Scotland Pay and Reward Committee or less if this has been determined by the Committee, at which time a further assessment of the market conditions and organisational requirements will take place to determine whether the payment should be preserved, varied or withdrawn. Payments will be withdrawn after a defined notice period where there ceases to be an organisational need or market justification for a supplement. Post holders will receive written confirmation of the outcome of the review. Version

9 (d) (e) (f) Where the outcome of the review is that the supplement will be preserved at its current level or increased to reflect the current market conditions and this will take effect in the salary month following the review date. Where the outcome of an annual review is that the supplement is to be reduced or withdrawn, the employee(s) concerned will be given three months written notice of the variation, after which time the reduction/withdrawal will take effect. The employee will be informed of how objective market data has been used to calculate the reduction or withdrawal of a market supplement. Any continuation of the market supplement payment will be for a fixed time period of up to 12 months, and any further extension will be considered at the next review date. 12. Monitoring Data on all market supplement payments will be compiled and reviewed annually by the P&D Pay and Grading Team for equal opportunities monitoring purposes. Supplements will also be included in any equal pay audits that SPA/ Police Scotland may undertake. 13. Roles and Responsibilities 13.1 Chief Superintendent / Head of Department and HR Business Partner Chief Superintendents/Head of Departments and HR Business Partners are responsible for: investigating the recruitment and or retention issue; considering other alternatives to market supplements; ensuring that the checklist has been fully exhausted; completing section one of the Market Supplement Application Form ( ); contacting and transmitting the proforma to the P&D Pay and Grading Team; and applying the instruction of the SPA/ Police Scotland Pay and Reward Committee P&D Pay and Grading Team The P&D Pay and Grading Team are responsible for: ensuring that part one the Market Supplement Application Form ( ) is completed correctly; undertaking market analysis of role (s) named in part 1 of the form; Version

10 evaluating if a market supplement would be justified when compared with appropriate roles within a national or specific benchmark data set; providing financial data in terms of an appropriate supplement, if supported by market analysis; making a recommendation in terms of the level of the market supplement to be considered; organising and facilitating a meeting of the SPA/ Police Scotland Pay and Reward Committee; transmitting the decision of the PRC to the applicants, typically the HR Business Partner; and retaining all of the process paperwork and managing the review process SPA / Police Scotland Pay and Reward Committee The SPA/ Police Scotland Pay and Reward Committee are responsible for: formally considering the evidence as outlined in part one and part two of Market Supplement Application or Review Form ( ); rejecting the application, if no market data available to support the granting of the supplement; approving the market supplement, if sound business case has been made, all other options have been explored and market data supports the granting of the supplement; and setting the duration of the supplement and the review date. Version

11 Appendix A List of Associated Legislation and Guidance All relevant legislation and guidance relating to this policy may be found at including but not limited to: Equality Act 2010 Version

12 Appendix B List of Associated Forms The relevant SPA/ Police Scotland forms are available from HR including: Market Supplement Application ( ) Market Supplement Review ( ) Version

13 Appendix C List of Associated Reference Documents Relevant SPA/ Police Scotland SOPs are available on the intranet including: Equality, Diversity and Dignity SOP Pay and Reward Policy Version

14 Appendix D Glossary of Terms Total reward rate Total reward package Total reward market rate Base pay plus any contractual allowances and other benefits that may be applicable to any given role or groups of roles Base pay plus any contractual allowances and other benefits derived from terms and conditions, such as cafeteria benefits, contributory pension scheme and access to flexible working arrangements etc., that may be applicable to any given role or groups of roles Base pay plus a calculation of other benefits that may be recorded for benchmarked comparators Version

15 Appendix E SPA/PSoS Criteria and Process for Applying Market Supplements 1. Basic criteria to consider before completing Section one of market supplement application or review application Compare local turnover rates with market rates. Is there an evidenced sectoral or local shortage? This can be tested and evaluated by the Pay and Grading Team of Police Scotland, who now have access to a range of benchmarking tools. The approach should not be considered unless the post has been unsuccessfully advertised twice. Explore all avenues in relation to the recruitment to a post or group of posts, and ensure that vacancies have been advertised in relevant local, regional, national and/or professional media, where appropriate. Consult exit surveys to assess how far pay is a factor in employees decisions to leave the organisation. Evidence to show why the previous post holder left the role should be collected and readily accessible. Consider if waiting for an expected increase in supply for example from new trainees, if appropriate would alleviate the retention issue. Consider the impact on other staff within SPA/Police Scotland, if a market supplement or retention payment is applied? Would legal challenge or grievance be likely, and what impact would there be on morale? Consider non-pay benefits and total rewards package before considering market supplements and fully document the approach undertaken. Market Supplements or should not be seen as an easy option but as the least preferred option, when all other approaches have failed. Collate information in relation to the number of times (previous) post advertised before being filled, number of applicants to (previous) posts, vacancy level within service. Consider if service collapse without appointment, could the duties be reasonably undertaken by another Jobholder or Jobholders (without increasing workloads), is the post business critical or could it reconfigured to support recruitment or retention? Consider if retention problems are linked to unrealistic demands or non- pay elements of work, consider if the role has enough support or too much in the way of demand for the remuneration level? Version

16 Consider if the application of a market supplement could set an organisational precedent locally and therefore generate risks nationally? Evidence that market supplement will be cost effective (e.g. cheaper than role reconfiguration, re-grading or paying day rates). 2. Posts Applied To Market supplements and Retention Payments are applicable to all generic and unique roles, where national or local recruitment and retention difficulties have been identified. 3. Basic Process It is the responsibility of the relevant Chief Superintentdent/Head of Department, Deputy or equivalent to consider, in the first instance, whether payment of a supplement may be an appropriate means of addressing the recruitment and retention difficulties being faced. However, a decision about whether a pay supplement should be paid rests with the SPA/Police Scotland Pay and Reward Committee. The committee is chaired by Chief Executive of the SPA and will also include the Director of People and Development (Police Scotland), the Director of Financial Services (Police Scotland) and the Director of HR Governance (SPA), who are all voting members. The committee will also include the Pay and Grading Manager for Police Scotland and a committee clerk from the Pay and Grading Team. The Panel s decision will be informed by a business case pro-forma and evidence gathered and submitted by the responsible person. 4. Guidance for Developing Business Case to be Included in Section One of Market Supplement Application or Review Application 4.1 The business case should be completed using a standard pro-forma and would be prepared in consultation with a Senior HR Business Partner and the HR Pay and Grading Team, if required. 4.2 The business case should be developed by considering the following information and should demonstrate that all of these factors have been considered: Recruitment a description of the nature of the recruitment difficulties being experienced. The results of recruitment exercises which have been held to fill the relevant post(s) applicable only if you are tackling recruitment problems. Retention evidence of retention difficulties, in particular the number of staff who have left SPA/Police Scotland for comparable jobs elsewhere at a better salary/employment package applicable only if you are tackling retention problems. Version

17 Risk to business a description of the consequences of not being able to attract or retain staff with the necessary skills and experience, e.g. material operational difficulties and/or a risk to the delivery of key objectives. Market evidence (external) up to date evidence about the pay and terms and conditions for comparable jobs in the external labour market. Market evidence should generally focus on the Scottish labour market but should include relevant UK data, when appropriate. Market evidence (public) up to date evidence about the pay and terms and conditions for comparable jobs elsewhere in the public sector. Market Analysis up to date evidence from benchmarking analysis. The benchmarking analysis report will be used to inform all decisions about market supplements. Posts set out the eligibility criteria, which will apply to the award of market supplements, the number of posts, which will attract a market supplement, the value and duration of the proposed supplement. Equal Pay provide an assurance that so far as possible any possible equal pay issues have been considered. Version