2015 Pay Review

Ofwat currently has 5 broad pay bands covering approximately 160 employees and existing pay arrangements have been in place for some time. Employees are either based in our Birmingham or London office. HM Treasury set Ofwat’s pay remit annually from August each year. Civil Service annual pay has increased on average by 1%.

Ofwat is looking to engage a third party reward specialist to undertake a pay review, taking into account of the following reward issues:

• Limited budget to progress individuals within the salary bands, with some individuals staying at the lower end of the band and not progressing. Progression is often only achieved through promotion or a robust business case with approval from the senior leadership team. • Interim uplifts in pay are ad hoc with limited guidance provided to managers and employees. The process requires greater transparency. • External appointments are able to negotiate higher rates of pay compared to existing employees, creating disparity in pay levels. Market pay dictates external pay but existing employees have no current benchmark. • There is a desire at the Remuneration and People Committee to increase Ofwat’s ability to reward for performance, which needs to be balanced with concerns about fairness from a traditional civil service workforce. • Current pay levels are affecting Ofwat’s ability to attract, recruit and retain into certain roles with skills and experience that are not commonplace.

3. Scope of work We have an initial, immediate requirement to carry out some work in relation to this year’s pay remit (Phase 1 below). This will then lead into a wider piece of work (Phase 2 below).

Phase 1

Producing an evidence based business case for approval by HM Treasury to increase the 1 August 2015 pay remit from 1% to a level that would allow Ofwat to address pay concerns noted above and bring individuals to or closer to the market median for their role.

This piece of work would need to be delivered at pace as employees have an expectation that their salary will be increased from 1 August 2015 in line with the HM Treasury pay remit. Whilst we can backdate the pay award we want to limit any unnecessary delay for employees.

Phase 2

This is a wider piece of reward redesign work to produce proposals which focus on:

• Creating new mechanisms for pay progression, including options for performance related pay. • Reviewing how the current performance related bonus scheme is operating and suggesting options to improve this. • Identifying other recognition schemes Ofwat could put in place. • Considering reward frameworks used in other areas of the civil service.

This piece of work would need to be delivered at pace once Phase 1 is complete, with recommendations provided to the Remuneration Committee by the beginning of November 2015.

Additional information: For further information, please contact: [email protected]