Public Sector Pay

Issued 5 December 2014

Efforts to reduce the public service pay bill have been at the forefront of the drive to reduce the cost of running the State.  As well at direct cuts to take home pay and to pensions, the last few years have also seen some radical reform to the conditions of service of public servants, with previously untouchable areas of conditions, such as hours, flexible redeployments, sick and annual leave benefits, and so on, all reduced.  New entrants since January 2013 join a radically revised pension scheme that better reflects earnings over the period of employment in the public service.

The workforce, which was never large by OECD standards, has fallen by 10% through voluntary departures and non-filling of vacancies.

Reduced cost of the public service

The effect of all these measures on the combined pay and pensions bill, and on the take home pay of individual public servants, has been very marked.  As part of the recent Comprehensive Review of Expenditure conducted by the Department as part of the Budget, an interesting piece of research on the evolution of the pay and pensions bill was completed by our Department’s IGEES.

As well as showing how various Governments have over the years prioritised employment in front line sectors, such as education and health, it also looked at a few counterfactual scenarios.  The most startling estimate looks at how the pay bill would have developed if no interventions had been made on public service pay and numbers after 2008. If staffing levels had continued to rise as they had in the previous 5 years and if increases granted under wage agreements in force at the time had taken effect, albeit with a pay freeze from 2010, we estimate the paybill could have been 50% larger in 2013 at around €21billion, rather than €14.2 billion as was actually the case.

What are the implications for recruitment?

In the deepest period of the crisis and the priority to restore the fiscal health of the country, the public service didn’t really have to consider issues around its attractiveness as an employer as a full moratorium on recruitment to anything other than the most key jobs applied. The Government has now indicated a change in that approach in 2015.

In that context, Government policy on pay sets us in DPER a key challenge in attracting and retaining a skilled workforce for the future.  For most public servants, where the public sector is the leading, or only, employer, say in teaching or policing, we have to set pay rates that will be sufficiently attractive to attract the necessary number of high quality recruits, in particular graduates, while taking into account the other benefits of public service employment, including pensionability, and the Exchequer’s ability to pay.

It is also noticeable that some pressures are starting to come through in the context where private sector employers in Ireland are able to pay higher amounts for scarce or valuable skills. In the IT sector for example CSO data suggests that pay increases have continued over the period of the recession.  For some of our more mobile workforce – say, hospital doctors trained at State expense to a high calibre over many years – we are competing with employers across the world.  So choices will need to be made, as we emerge from the fiscal emergency and start broader based recruitment, to ensure that the pay policy for the public service continues to balance the effective delivery of public services and Government policy with sustainability and affordability into the future.

Pay is not the only attraction that an employer can offer a future employee.    We will have to develop and promote the civil and public service as a good employer, one interested in reform, in doing a good job and doing so in a way that is accountable, open to change and to improvement.

 

Brendan Howlin, TD, Minister for Public Expenditure and Reform

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