There was a bit of a panic in the Kremlin last week when members of the senior staff committee, and leaders of groups not represented on that committee, were summoned to a hastily convened private meeting in the Leader’s office to discuss the pay levels of the new chief executive and senior officers.
Late last year, the council agreed to pay the acting chief executive £145,000 a year, but the Independent Remuneration Panel for Wales put a spoke in the wheel by coming out with a recommendation that an authority the size of Pembrokeshire shouldn’t pay its top gun more than £130,000.
Following a debate on this issue at full council on December 11 it was resolved:
(a) That Council requires the Senior Staff Committee to identify and assess options for the role of Head of Paid Service and reports to Council for decision on the salary level.
The senior staff committee met on 3 February and my understanding is that they agreed to the £130,000 figure though, as the minutes have not yet been published, I can’t be absolutely sure.
What is for certain is that the recommendation of the senior staff committee is not on the agenda for Thursday’s meeting of council, as would seem to be required by the resolution of council on December 11.
That, I am reliably informed, is because the plan has hit a snag.
At the meeting on December 11, I asked a question about a policy made long ago that directors’ pay shouldn’t encroach within 77.5% of that of the chief executive.
As the mathematicians among you will already have worked out, 77.5% of £130,000 is £100,750, so, if the rule was enforced, the directors would have to take a substantial pay cut from their present level of circa £112,000.
Thanks to the wonders of the webcast, I can tell you exactly what was said:
Grumpy: “I seem to remember that some years ago there was a policy adopted in this council that directors couldn’t encroach within 77.5% of the chief executive’s salary.
Now, I have no recollection of that ever being rescinded.
I think that was a policy adopted way back in 1995/96 when this authority first came into being.
And, if it hasn’t been rescinded, then it is probably still in force.
And if we adopt the £130,000 salary for the chief executive I think that would mean that directors’ salaries couldn’t encroach above £100,500.
So that would mean them having to take pay cuts.
Perhaps Mr Ceri Davies [Head of HR] could tell us if that’s still the case.”Leader: “We’re not dealing with that agenda item, with respect.”
Paul Miller then intervened to say that my question was relevant to the issue before council and that the Leader “couldn’t be more wrong”.
Grumpy: “Could the head of HR answer my question?”
Ceri Davies: “I can advise that, having looked into the matter, there doesn’t appear to be any relationship whatsoever between the directors’ salaries and the chief executive’s salary.”
Jacob Williams: “The matter Cllr Stoddart referred to was introduced in 7 July 1995. I know because I’ve trawled through the council’s website minutes that introduced the policy that the directors’ posts should be at 77% of the chief executive’s salary.” He concluded: “Could Mr Davies advise when that was repealed because I’m not aware that it has been?”
Ceri Davies: “Chairman, I don’t have the exact date for members this afternoon, but I believe it was in 2004-2005, but I would need to look into that.”
Chairman: “But you can confirm that?”
Ceri Davies: “That’s my understanding.”
I did send Mr Davies several emails asking for the date on which the 77.5% rule had been abolished, but I never did get a satisfactory reply.
When the matter came before the senior staff committee on 3 February, Cllr Tessa Hodgson raised the same issue, but by now the council were singing a different tune and she was told by the HR officer present that the rule had been disregarded so often in the intervening 20 years that it no longer applied.
I must say that the concept that a rule can be repealed through being persistently ignored is an interesting one.
However, it now appears that the certainty about the demise of the 77.5% rule, either by direct repeal, or disuse, has given way to serious doubt.
And it seems that the main issue isn’t whether directors would have to take a pay cut, but whether they have been underpaid all these years during which Mr Parry-Jones had been trousering his enormous pay cheques.
To give an idea of the scale of the problem, 77.5% of Mr Parry-Jones’ £174,000 salary would set the pay of directors at £134,850 and, as the pay of less senior officers is set as a percentage of directors’ salaries, this underpayment reaches far down the food chain.
I understand m’learned friends have been called upon to provide an opinion.
My own view, for what it’s worth, is that the council is in the clear, but if I’m wrong the bill could be enormous.
One important question concerns the exact status of this 77.5% limit.
One interpretation – the one I have always assumed to be correct – is that directors’ pay mustn’t encroach within 77.5% of that of the chief executive[1].
The other is that director’s pay will be set at 77.5% of that of the chief executive[2].
To unravel this issue we have to go back to 1995 when Pembrokeshire CC was resurrected.
At a meeting on 12 June 1995 the shadow authority resolved “To appoint Mr D Bryn Parry-Jones as chief executive … at a salary of £63,000 being the maximum point of the salary scale £57,273 – £63,000.”
When the council met five weeks later on July 17, the recently appointed chief executive circulated a report on the salaries of the seven directors that the council had agreed to employ.
According to this report “A scale of £50,000 – £55,000 was identified as the least in order to compete effectively. However that would infringe on the differential between the chief executive and directors which had to be maintained.”
Later in the same meeting the minutes record: “Members referred to a debate earlier in the meeting when it was recognised that the salary levels agreed for the seven directors infringed on the differential between the chief executive and directors’ pay levels which was established through the national grading structure. Members acknowledged that this situation should be rectified as follows: that it be established as a matter of policy that the grade of directors’ posts be at 77.5% of the chief executive…”
Now this talk of infringing the differential would seem to indicate that the 77.5% limit came under [1] above.
However, “be at 77.5%” seems to be consistent with the interpretation at [2] above.
And the resolution continues: “…and that the chief executive be positioned at the bottom part of the revised grade.”
As I wrote in the Mercury at the time, the councillors who approved this must be the sort of people door-to-door salesmen dream about because, in the space of five short weeks Mr Parry-Jones had progressed from a salary of £63,000 (top of the scale) to £64,500 (bottom of the scale) with annual increments of £1,290 to come over the next five years taking his salary to roughly £71,000 not including annual cost of living increases.
Not that it ever came to that because in April 1998 the council met behind closed doors and agreed to place him on a new level of £83,715-£87,002, which, as the mathematicians among you will already have worked out, represents a rise of some 35% in less than three years.
The full story of how he got from there to £174,000 during the following 15 years can be found at (Fools and our money) and (Two jobs).
But I digress.
The question the lawyers will have to wrestle with is whether the 77.5% represents an encroachment limit, or a fixed ratio between the chief executive’s salary and that of the directors.
If it is the latter, there is a possibility, no more, that some officers may be due a large cheque for back pay.
However, Old Grumpy recalls that, whenever one of these large pay increases has been approved it was always accompanied by an assurance that it wouldn’t affect those on the lower rungs of the ladder.
And, after digging around in the council’s archives, I came across the minutes of the senior staff committee on 30 March 2006, when Mr Parry-Jones was handed the last of his huge pay hikes. They record that members were assured that “…the review related solely to the Chief Executive’s salary as part of his personal contract of employment and stood apart from other senior members of staff” which seems to support interpretation [1].
If that is true, the council would seem to be in the clear.
And, even if [2] is the correct interpretation, it seems to me that senior officers who have joined the authority since 2005 at a salary level agreed during the recruitment process wouldn’t have much of a case.
There may, however, be officers who have been with the authority since its inception and they might be a different kettle of fish.
Indeed, I hear it has been said that, if things turn out badly for the council, one particular long-serving officer could be due for a payout that would dwarf the £270,000 it took to oil the wheels of Mr Parry-Jones’ departure.
I hear a rumour that the issue has been left off the agenda for Thursday’s meeting in order to give the legal eagles time to study the matter.
The intention, I understand, is for an extraordinary meeting of council to be called once the legal position is clarified.
Knowing how m’learned friends’ bills can escalate, it is to be hoped it doesn’t take them too long.