Public sector pay policy: technical guide - April 2025

2. Scottish Government Pay Policy Position

Progressive pay awards

2.1 One of the strategic aims of the Pay Policy is to provide progressive pay awards and to protect those on lower incomes, being cognisant of the journey towards pay restoration for the lowest paid. Public bodies are required to pay at least the real Living Wage. Pay negotiations should include consideration of targeted measures for the low paid including cash underpins, alongside pay caps for high earners if appropriate, as part of delivering a progressive, affordable, and sustainable solution.

Affordability considerations

2.2 When considering pay awards public bodies must demonstrate the affordability and sustainability of the pay award (including progression costs). The Scottish Budget defines the budgetary envelope and affordability for public sector pay deals.

Workforce and Fiscal Sustainability considerations

2.3 Pay metrics must balance flexibility with fairness and affordability, which may mean taking decisions on the size and shape of the workforce, alongside opportunities around, for example, digital reform, revenue generation, estates rationalisation and improved procurement.

Working week

2.4 Previous Public Sector Pay Policies set an expectation that employers work towards standardising to a 35 hour working week, and committed to a public sector four day working week pilot. Through 2023-34 all public bodies were invited to consider participation in the four day working week pilot, with entry closed to further participants in early 2024. The pilot, and the accompanying evaluation report will be concluded and published in Spring 2025. Once published the evaluation report will be available on the Public Sector Pay Policy webpages.

2.5 Public bodies have the flexibility to consider working patterns that support operational efficiency, employee well-being, and service delivery, provided they remain within existing budgetary constraints and do not impact the delivery of public services. Any changes to working arrangements should be managed in line with organisational needs and workforce strategies, while ensuring alignment with the principles of affordability and sustainability. Public Sector Workforce officials and Sponsor Teams should be engaged in any potential changes to working arrangements. Any deviation from existing working time arrangements from across the Pay Policy cohort will also require Ministerial views.

No Compulsory Redundancy commitment

2.6 The statutory definition of "redundancy" encompasses three types of situation: business closure, workplace closure, and reduction of workforce. The dismissal of an employee will be by reason of redundancy if it is “wholly or mainly attributable to” the employer.

• Business closure - ceasing or intending to cease to carry on the business for the purposes of which the employee was employed by it (section 139(1)(a)(i), ERA 1996).
• Workplace closure - ceasing or intending to cease to carry on that business in the place where the employee was so employed (section 139(1)(a)(ii), ERA 1996).
• Reduction of workforce - having a reduced requirement for employees to carry out work of a particular kind or to do so at the place where the employee was employed to work (section 139(1)(b), ERA 1996).

2.7 The intention behind Ministers’ No Compulsory Redundancy commitment is to ensure that, in any of the above circumstances, the employer works closely with affected staff and their unions, to identify suitable alternative employment opportunities.

2.8 The Scottish Government’s position on No Compulsory Redundancy creates the right environment to provide staff with job security, while enabling employers and their staff representatives and/or trade unions to take a range of steps to manage their headcount and budgets to realise the necessary savings to deliver efficiencies. Where public bodies are seeking to re-structure, full consideration must be given to redeployment and retraining.

2.9 Public sector leaders and trade unions may need to engage on matters relating to the reduction or reprofiling of the workforce as part of pay negotiations. Public bodies should work with their staff representatives and / or trade unions to negotiate extensions to their no compulsory redundancy agreements for 2025-26 or beyond. Proposals to change the No Compulsory Redundancy commitment through the application of the Severance Policy for Scotland (extend, pause or reverse), will be considered on a case-by-case basis.

2.10 The key aim remains for public bodies to deliver quality service within constrained budgets. We look to public bodies to implement the Pay Policy in a way that supports this alongside wellbeing and our Fair Work principles.

2.11 Where negotiated, a No Compulsory Redundancy agreement extends to all directly employed staff for the period agreed. Public bodies would be expected to look at all appropriate measures to avoid compulsory redundancy. This can include: transfer to other areas of work both within the organisation or to another public body (if agreed arrangements are in place); reviews of working practices such as reducing overtime; restricting promotions/recruitments; or restricting the use of temporary workers or fixed-term appointments, etc. The No Compulsory Redundancy agreement does not apply to the termination of a temporary appointment or the end of a fixed-term contract where staff are recruited for a limited period.

2.12 The No Compulsory Redundancy commitment may mean that employers seeking to restructure, in discussion with trade unions, may wish to consider voluntary exit schemes following consideration of re-deployment and re-training. Any public bodies seeking to do this must follow the relevant guidance in the Scottish Public Finance Manual. Further advice can be obtained by contacting severance-policy-for-scotland@gov.scot.

Fair pay and pay inequalities

2.13 The Scottish Government recognises the importance of treating people fairly in the workplace and encourages best practice among its public bodies as set out in the Fair Work Framework^[3]. This commitment extends to ensuring secure and sustainable employment, discouraging the use of zero-hour contracts, excessive reliance on agency workers and unstable temporary contracts. This recognition is embedded in Scotland’s Labour Market Strategy^[4].

2.14 All employers are encouraged to follow the Scottish Government’s lead and have a Fair Work Agreement with their respective trade unions and/or staff representatives. The agreement between Scottish Ministers and the recognised civil service unions is available at: Scottish Government Fair Work Agreement.

2.15 It is important public bodies meet the legal duty placed upon them in the Equality Act 2010 and public bodies are encouraged to work jointly with their trade union(s) in undertaking their equal pay reviews. Further information on the Scottish Government's duties under the Equality Act 2010 is available at: Outline of Scottish Government's duties under the Equality Act 2010.

2.16 Each public body is required to make sure it has due regard to the legal requirements of the Equality Act 2010 (section 149) when considering its pay systems. In terms of pay proposals, public bodies are expected to have carried out equal pay reviews and set out in their business case the results of such reviews and the steps they propose to take to address any inequalities they have identified.

2.17 To help public bodies better meet the requirements of the public sector equality duty, the Scottish Government has introduced regulations in the Equality Act 2010 (Specific Duties) (Scotland) Regulations 2012 which places a number of requirements on public authorities. This includes report on the work being done to mainstream equalities; set outcomes; publish and use employee information and to assess the impact of their policies and practices on people from with one or more of the protected characteristics listed in the Equality Act 2010.

2.18 Where a public body has identified a potential pay inequality they wish to address, they will need to provide evidence of the extent of this inequality. A full risk assessment, including the likelihood of claims and the extent of potential liability, as well as the costs of dealing with the issue, should form part of the business case. They will also need to propose ways of tackling this in a cost effective way, subject to affordability constraints and where appropriate the Pay Policy limits. If it is not possible to make the necessary changes within the Pay Policy limits, the relevant Sponsor Team will liaise with the Public Sector Pay team and to determine whether the proposals should be put to the Remuneration Group and potentially Ministers for their consideration.

2.19 In line with the Scottish Government’s commitment to tackling pension inequalities and maximising retirement income, public bodies should be aware of the factors contributing to pension disparities, including the link between the gender pay gap and the gender pension gap. While past pension arrangements do not automatically justify continuation, Sponsor Teams and public bodies should ensure that decisions about pension provision are made with an awareness of long-term impacts on financial security in retirement. Public bodies are encouraged to work with trade unions to understand the factors contributing to pension inequalities in their workforce and consider appropriate measures to address them, such as improved pension information and engagement initiatives.

Anti-racism

2.20 The Scottish Government’s anti-racist employment strategy – A Fairer Scotland for All, published December 2022, seeks to respond to the scale and prevalence of institutional racism. It supports and encourages employers across the economy to take an anti-racist approach to practices across recruitment, retention and progression. This includes the pay and employment practices of agencies and public sector organisations required to follow Scottish Government’s Public Sector Pay Policy. Employers are encouraged to develop and implement race equality plans, which include monitoring and reporting on the representation of staff from minority ethnic backgrounds across different grades, as well as taking steps to understand and address any race-related pay disparities.

2.21 Employers are encouraged to go beyond pay reporting and identify factors driving the ethnicity pay gap and take appropriate action to address these. The anti-racist employment strategy provides practical guidance, case studies and suggested actions to support employers to do so.

2.22 The Scottish Government is committed to “increase the number and impact of actions that employers are taking to address racial inequality in their workplace”. Public sector employers complying with the Public Sector Pay Policy have a key role in ensuring delivery of that ambition.

Impact Assessments

2.23 All employers will be required to confirm that they have considered their obligations under equalities legislation in developing their pay proposals. Employers will be expected to review their pay systems on an annual basis, and ensure they carry out relevant Impact Assessment(s) of their reward policies and practices. Undertaking Impact Assessment(s) should already be an embedded practice for Scotland’s public sector employers.

2.24 The Scottish Government is committed to ensuring pay systems in the public sector are fair and non‑discriminatory and has published Equality Impact Assessments, which are available at: Public Sector Pay Policy webpages.

Wellbeing

2.25 The Scottish Government is committed to promoting wellbeing of all people living in Scotland, including recognising the importance and benefits of wellbeing measures to both employers and employees. Employers are required to actively look at how they can promote wellbeing in their workplace to support a positive and healthy work-life balance. The Pay Policy encourages employers and trade unions/staff representatives to engage in dialogue around wellbeing in their public bodies. Public bodies will be expected to identify any changes they propose to introduce.

Right to Disconnect

2.26 There is an expectation that all employers have implemented or agreed a Right to Disconnect policy for all staff, discouraging an "always on" culture. Right to Disconnect is fundamentally a matter for discussion between employers and their trade unions/staff representatives although the Pay Policy would advocate it as good practice for employers to develop their own policies on this.

Pay coherence

2.27 In the context of the Pay Policy, pay coherence is defined as the move towards greater consistency in rates of pay for roles with the same job weighting in public bodies covered by the Public Sector Pay Policy. Pay coherence can also refer to greater standardisation of allowances and terms and conditions. The expectation for public bodies intending to address pay coherence issues is that Scottish Government (as the largest employer) will be the main benchmark both for salary levels and for terms and conditions.

Pay increases for part-time employees

2.28 The Pay Policy intention is for all increases to be based on an individual’s full-time equivalent salary so that part-time employees will receive all increases on a pro-rata basis. The reason for this is that it is the most equitable approach and maintains the integrity of existing pay and grading structures. This approach provides all staff in the same grade and job weight the same proportionate increase ensuring equal pay for like work or work of equal value.

Multi-year pay proposals

2.29 The Pay Policy may encourage or set expectations on multi-year pay awards. This could include the option for employers, in discussion with their trade unions / staff representatives, to either apply a single year or take a multi-year approach to pay enabling a more strategic approach.

2.30 Where a public body wishes to consider pay proposal lengths that do not align with any expectations set out in the Pay Policy, they should contact their Sponsor Team at the earliest opportunity.

Backdating

2.31 Pay awards, or uplifts to daily fees can be applied from their agreed settlement date. Backdating beyond the current financial year is not recommended. Further advice can be obtained from the Pay team, via the Sponsor Team, if considering backdating pay or daily fee uplifts.

Green initiatives

2.32 The Scottish Government encourages employers to offer assistance with green initiatives. Where a public body proposes to introduce such initiatives they should discuss with the Sponsor Team in the first instance as to what information is required and the appropriate approvals process. Details should be set out in the business case for information only as the costs are not required to be included within the Pay Policy limits.

Salary Sacrifice on pensions

2.33 Salary sacrifice on pensions (sometimes called salary exchange) proposals are not considered acceptable. This applies to all types of pension schemes (defined contribution/money purchase and defined benefit, whether public service pension schemes or other arrangements) and all employees, including the Chief Executive. Under salary sacrifice on pensions arrangements, the employee gives up a portion of their salary in return for the employer making an additional employer pension contribution (of the identical value) to the employee’s pension pot. Both the employee and the employer pay less NICs. Public sector organisations should, as a general rule, avoid tax management arrangements that have the primary objective of reducing tax liabilities, or could be perceived, reasonably, as seeking to minimise tax liability.

2.34 There is a presumption against making payments (including as a pay enhancement or lump sum) to individuals in lieu of employer pension contributions where they have withdrawn from or opted not to join the company pension scheme, whether as a result of Annual or Lifetime Allowance limits or for other reasons. All payments to individuals must comply with the Tax Planning and Tax Avoidance section of the Scottish Public Finance Manual. This paragraph applies to all employees, including the Chief Executive.

Amending or restructuring a pay and reward system

2.35 Where a public body is considering a pay and grading review, which could include restructuring their existing pay and grading system, wholesale or targeted, they should discuss them with their Sponsor Team at the earliest opportunity.

2.36 When developing proposals that make any changes to their existing pay and grading structure the public body should take into account the following points, (providing evidence where appropriate):

• the wider read-across of their proposals for other public bodies
• the proposed pay ranges should be compared a relevant labour market, with equivalent grades being compared
• in most instances, the expectation is for the relevant labour market to be the other public bodies subject to the Public Sector Pay Policy
• public bodies should ensure any job evaluation scheme they use enables them to fully utilise this data
• the expectation that any new pay range maxima should not result in it being more than 5 per cent above the relevant labour market median maxima
• any proposed increases to a pay range minima will not result in paying above the relevant market for that grade or build in future paybill pressures as a result of paying new recruits and/or promotees a higher starting salary
• that the proposed changes do not adversely affect the integrity of the public bodies pay range system
• that the proposals should be both affordable and sustainable. To demonstrate this, public bodies are expected to provide projected annual progression costs for the three years following implementation of the restructuring.

2.37 The Sponsor Team should engage with the Public Sector Pay team at the earliest opportunity to determine the appropriate approval route for the pay and grading review, which is likely to include Remuneration Group consideration.

2.38 If Remuneration Group consideration is the appropriate approval route, the Sponsor Team is required to submit a full business case which should include;

• details of the proposals and their benefits
• the relationship to the relevant labour market
• the associated costs
• the affordability and sustainability of the proposals.

2.39 Information on other relevant factors should also be detailed if appropriate. This could include; grading methodology, implementation methodology, trade union engagement, risks, career progression through the pay system, etc.

Non‑consolidated performance payments (bonuses)

2.40 All non‑consolidated performance payments (bonuses) continue to be suspended. There is a presumption against provision for non‑consolidated performance payments (bonuses).

Deviation from the Public Sector Pay Policy

2.41 If any pay awards are implemented or Daily Fees are introduced without approval or increased beyond that for which approval had been obtained previously, the Sponsor Director and the Accountable Officer will be required to explain the matter to the Remuneration Group who may refer to Ministers. This could result in punitive action being taken by the Scottish Government, such as the recovery of any overpayments, the capping of future increases or a governance review of the public body.

Data Protection

2.42 All personal data collected as part of the Pay Policy process is handled in accordance with the requirements of data protection legislation and in particular the principles of the General Data Protection Regulation (GDPR) and the Data Protection Act 2018 (DPA 2018). Any personal data collected as part of the staff pay remit process is solely for the purposes of evaluating the costs of the current Pay Policy, modelling the impact of future Pay Policy and helping shape the Scottish Government’s strategic views about the public sector workforce. Any information published by the Public Sector Pay team will ensure individuals cannot be identified.

2.43 Individual public bodies are responsible for ensuring they have due regard to their obligations under General Data Protection Regulation (GDPR) when providing information to the Scottish Government as part of the Pay Policy process. Public bodies are not asked to provide names of individual staff members.

2.44 To mitigate the risk of any inadvertent data protection breaches, public bodies are requested to identify any information that carries a risk or potential risk of identifying an individual staff member.

Data Sharing Agreements - lawful basis for processing

2.45 In the context of lawful basis for processing in Data Sharing Agreements, the Pay Policy has a lawful basis. Most statutory bodies give control of pay to the Scottish Government either in their constitution or a memorandum of understanding. Generally, a pay policy is necessary to run the Scottish Administration and legal cover for running that body is in section 65 of the Scotland Act which allows for the financing of the Scottish Administration provided there is budgetary cover in annual budget acts.

Timeliness of remit proposals

2.46 Scottish Ministers have highlighted the importance they place on individuals being paid on or close to their recognised settlement date. To help achieve this, all parties taking forward the pay process should endeavour to adhere to the agreed timescales. While paying employees on their recognised settlement date is important, we recognise there is due process to follow in delivering this which can cause unavoidable delay and would ask that public bodies keep their Sponsor Team up to date on progress with pay negotiations. Sponsor Teams are required to update the Public Sector Pay team regularly, and provide the information required for status reports.

Required information

2.47 Public bodies will be issued with the relevant proformas, business case template and guidance which set out the information they are required to provide to enable them to seek approval for their proposals. Public bodies are required to provide information on the costs of applying their maximum negotiating remit, their pay and grading structure and staffing profiles as well as details of their non-salary benefits.

2.48 The business case template requires information on the actions taken to ensure the pay award is financially sustainable within the resources available to a public body (recognising that these resources reflect the Government’s priorities). This should also provide details where possible on how savings will be delivered.

2.49 Where remuneration proposals are being developed for new public bodies or for public appointments not linked to a public body, Sponsor Teams should contact the Public Sector Pay team for advice on what information is required.