States Employees: pay increase for 2009/2010 (P.68/2009) – comments.

STATES OF JERSEY

STATES EMPLOYEES: PAY INCREASE FOR 2009/2010 (P.68/2009) – COMMENTS

Presented to the States on 24th June 2009 by the Chief Minister

STATES GREFFE

2009   Price code: A  P.68 Com.

COMMENTS

The  States  Employment  Board  opposes  the   Deputy  of   St. John 's  proposition because  it  would  increase  the  pay  of  States  employees  during  the  current recession. The resulting cost would increase future potential deficits and would have to be funded from public taxes.

1. The  proposition  minimises  the  economic  reality  facing  the  States  and  its employees. The Council of Ministers and SEB considered two key factors when deciding that it would be appropriate to freeze public sector pay levels by not implementing a cost of living pay increase in 2009 –

1. States financial forecasts are showing that there will be significant reductions in States revenues over the next few years and that once the Island comes out of recession, there will be ongoing deficits. These will need to be funded by tax increases or service cuts. Pay awards will simply exacerbate the size of those tax increases or service cuts.
2. Given the economic downturn, private sector companies are in many cases facing the prospect of job losses and/or pay freezes. At such a time, it is not reasonable for States employees, who enjoy a much larger measure of job security, to expect their pay to increase this year. They too should be making the choice between pay awards and job security. The very people who will be asked to fund a States' employees  pay  award  through  their  taxes  include  private  sector employees who may be facing the prospects of pay freezes or job cuts.

2. The  maximum  full  year  effect  of  an  increase  of  £400  for  the  full-time equivalent of 6,405 States employees would be £3,074,400including the cost of pension and social security.
3. The Minister for Treasury and Resources has lodged proposition P.78/2009which is asking the States to remove the provision for pay increases from the2009 cash limits as a first contribution towards the inevitable savings that willbe required to balance the States' income and expenditure in future years. Thisproposition would undermine that proposal and would add to the size of futurepotential  deficits.  This  in  turn  would  require  further  tax  increases  orreductions in services in order to fund the award. The Minister for Treasuryand Resources' proposition would produce savings of £3,501,600 in 2009 and£6,274,800 in 2010.
4. The proposition recommends that all employees should receive a flat rate increase  of  £400,  irrespective  of  grade  or  seniority.  But  the  Council  of Ministers is well aware from pay survey data that the States pay well in excess of the private sector at the lower grades and find it difficult to compete with private sector salaries at the more senior levels. A flat rate award would simply aggravate that situation. In his Emerging Issues report, the Comptroller and  Auditor  General  stated:  "for  some  positions,  the  States  pays  most generously in comparison with the private sector. For some senior positions, the States' remuneration system is not competitive with remuneration offered by private sector employers and in consequence, the States are at risk of losing senior employees." A survey of the comparison of public and private sector

Page - 2

P.68/2009 Com.

pay will be completed before the proposition is debated and will be sent to all States Members. A similar pay survey was undertaken in 2006.

One of the important summary tables resulting from that survey is reproduced below. What it shows is that in comparison with the Jersey private sector, both finance and retail/industrial, low-graded jobs in the public sector are paid well in excess of the Jersey private sector. For example, the lowest grade of public sector manual worker is paid 30% higher than a similar sized job in the private sector and also that the lowest grade of Jersey Civil Service job is paid 20% higher than a similar sized job in the Jersey private sector. It can also be seen that overall, public sector jobs at the lowest grades are paid on average 25.61%  higher  than  their  private  sector  counterparts.  These  substantial differences will only be exacerbated by awarding a flat rate increase across the  board'  as  proposed  by  Deputies  Rondel  and   Southern  or  specifically targeted toward employees at the lower end of the public sector pay bands as proposed by the Constable of St. Peter .

Table 1 – Salary Comparisons with the Jersey Private Sector

5. It should be noted that hospital consultants and other doctors have already received a 1.5% award this year as a result of their contractual UK link for pay purposes.
6. One of the reasons given for the increase is the introduction of GST. It has been made clear on numerous occasions that if GST prompts increased public sector pay awards this will negate the purpose of introducing the tax by giving back a significant proportion of what GST raises.
7. It should also be noted that almost £12 million has been agreed in increased tax allowances or increased social benefits to mitigate the effects of GST since its introduction in May 2008.

Page - 3

P.68/2009 Com.