Public SectorMarket Intelligence Report

Part 1 of 2

Overview 3

Skills shortages 7

Attracting tomorrow’s talent 10

Apprenticeships 10

Graduate programmes 11

Public sector pay 14

The future of the public 17 sector workforce

References 20

Contents

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Public/private sector definition: The public sector is composed of organisations that are owned and operated by the government. This includes educational bodies, healthcare bodies, police services and local authorities. The private sector is comprised of organisations that are privately run and owned, usually as a means of enterprise for profit. This includes corporations (both profit and not-for-profit), partnerships and franchises.

There were 5.378 million people employed in the public sector in March 2015.

In March 2015, 17.3% of people worked in the public sector and the remaining 82.7% worked in the private sector.

During the 2014/15 financial year, the government spent £107.85bn on public sector staffing.

The Conservative party manifesto commits to cutting total spending by 1% a year in 2015-16 and 2016-17. Spending will then be frozen in real terms for 2018-19.

Overview

This was: down 22,000 from

December 2014 down 59,000

from a year earlier the lowest figure since

comparable records began in 1999

£

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Public sector Private sector

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6500

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22.5

20

17.5

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7.5

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2015

5000

Some banks moved into the

public sector

English collegesreclassified out

of the publicsector

Royal Mail and Lloyds Banking Group plc reclassified out of the public sector

Public sector headcount % of total employment

Headcount (‘000s) Percent

Number of people employed in the UK public sector since 2000

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Since 2010 the government’s austerity measures to aid the financial recovery have cut total spending on local government budgets across the UK by 27% (to the 2014/15 financial year). This is reflected by the steady decline in local government headcount which is forecast to continue.

1,500

1,750

2,000

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2,750

3,000

1999

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00s)

Central government Local government

UK public sector employment in central and local government

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Local government

In Q1 2015, employment in local government fell by 23,000 (1.0%) on the previous quarter and by 85,000 (3.6%) on the previous year.

Central government

In Q1 2015, employment in central government decreased by 2,000 (0.1%) on the previous quarter but increased by 31,000 (1.1%) on the previous year.

This is partly due to academy conversions over the period and an increase in NHS employment.

There have been steep decreases in other areas though; the National Audit Office found that the number of civil servants fell by 18% between March 2010 and December 2014. This reduced the salary bill by £2.49bn to £11.13bn as part of the government’s deficit reduction drive.

33+67+H

60+40+H

Women Men

Public sector

Private sector

Women Men

57% of public sector workers have higher education qualifications.

Only 36% of private sector workers have the same.

Public sector job cutsFrom Q1 2008 to Q3 2014, 10.7% of UK public sector jobs were lost.

North East 19.5%

North West 13.9%

South West 15.2%

The perception was that public sector job cuts would facilitate employment growth in the private sector and rebalance the UK’s economy. This did not go as planned; London has had the greatest and fastest private sector jobs creation (15.7%) and also the smallest decline in public sector employment (3.1%).

Composition of workforce

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Within the digital landscape, skills shortages and funding are linked to both the cause and effect of the government’s

struggles to increase its delivery of digital services.

A Deloitte study of 400 senior leaders from across local government, the NHS, police and education saw 89% of respondents agree that lack of skills is hampering the success of digital programmes and cost cutting is the motivation behind their shift towards digital services.

To attract fresh new talent, the wider public sector must do more to appeal to young people now and in the future. Two successful initiatives which could be used as examples and mirrored elsewhere are the London Councils Internship Programme (LCIP) and the National Audit Office’s (NAO) apprenticeship scheme.

The LCIP is a partnership between University of London’s Careers Group and some of London’s largest boroughs which offers outstanding recent graduates the chance to undertake internships within a variety of departments and with a huge choice of future job opportunities.

Both initiatives provide young people with skills which set up a lifetime of job opportunities while promoting careers within the public sector at the same time.

The NAO offers selected school leavers a fully-funded five year pathway to becoming a qualified chartered accountant. This provides young people with skills which set up a lifetime of job opportunities and promotes the field of accountancy within the public sector at the same time.

Skills shortages 45% of public sector staff think the

workforce doesn’t have the skills it needs to deliver services efficiently.

In public healthcare, 60% of workers said the public sector doesn’t have the skills required.

43% of senior central government employees said external recruitment is needed to bolster the sector.

The four areas that were highlighted as having the biggest ‘skills gaps’ were: the perceived lack of leadership, IT, commercial and project management skills.

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Research by totaljobs.com and the Centre for Economics and Business Research found that “poor perception of the public sector” was the most common issue recruiters faced when scouting for new talent.

Despite this the work still needs to be done. There is progress being made to attract young and prospective future talent. Another recent report showed that more than eight out of ten of graduates are willing to consider a career in the public sector.

These potential candidates are beginning to realise there are numerous benefits to a career in the public sector, including: progression, flexible working and health and well-being programmes offered by employers.

The appeal of the public sector Public sector employer branding and increasing its appeal to candidates is extremely important and requires attention.

0 20 40 60 80 100

Private sector

Public sector 52%

87%

% of all jobseekers looking for work in each sector

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An ageing workforce

Older workers still comprise the greatest proportion of the public sector workforce, and minimising recruitment rather than redundancies of existing staff to save costs means this trend is likely to continue.

The percentage of the civil service workforce aged between 20 and 29 fell from 14% to 9% between 2010 and 2014, while the percentage of 50-59 year olds increased from 26% to 31%.

Other reports have warned the health and social work, education and public administration sectors are most at risk of skills shortages, because as well as being highly reliant on older workers - around a third or more of their workforces are over 50 - they also struggle more than other sectors to remain attractive to older workers.

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Attracting tomorrow’s talent The challenges presented by the public sector’s ageing workforce – only 7% of employees are aged 16-24 – will require a number of robust and thorough network of strategies. Apprenticeships and graduate programs are both part of the solution to ensure continuity and prevent an even greater perceived lack of skills.

Apprenticeship schemes

The government’s National Apprenticeship Service has committed to several different measures to increase the number of apprenticeships available and their appeal to both employers and prospective candidates.

Fully fund training costs for 16-18 year olds

Match an employer’s funding for 19-24 year olds

Contribute to the training costs of an agreed number of eligible apprentices aged 25 or more

There is an abundance of different apprenticeship opportunities available to young people across the UK within the various levels of local government. Some programmes involve apprenticeships located directly within a local authority’s operations, while others are a partnership between a council and local employers.

Westminster Council, Essex County Council and Leicestershire County Council are a few examples of local authorities who provide apprenticeship schemes to young people. At these three councils alone, opportunities lie within numerous departments such as housing, payroll, procurement, digital media, health and social care, IT and administration.

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Graduate programmes

As stated earlier, most graduates are open to considering a career in the public sector. There is also a growing trend among Generation Y to want to ‘do something that matters’ or support their local communities. Highlighting the benefits – the Employer Value Proposition (EVP) – of working in the public sector is a vital lure to young, prospective candidates who prioritise things like flexible hours and the chance to make a difference over salary and prestige.

Similar to the public sector apprenticeship schemes, the scope of available graduate programmes covers an enormous range of skills and departments, from more traditional tax officer roles within HMRC to specialist Russian intelligence analyst positions at MI6. Starting salaries within public sector graduate schemes range from around £17,000 up to more than £30,000 depending on the role and authority.

The highest wages on offer tend to include London weighting, while salaries for roles based away from the capital are typically lower. This section will briefly detail some of the different options available to UK graduates and give examples of campaigns which are leading the way.

Central government departments

The breadth of disciplines available in the Civil Service ‘Fast Stream’ makes it one of the most popular routes into the public sector. Areas of opportunity include HR, digital, project management and communications. However, only around 500 places are awarded each year which means competition is fierce. Selection criteria include a minimum 2:2 degree, though some departments such as finance, science and economics require a 2:1 or even a second degree. Starting salaries range from £25,000 to £27,000 per year, but can rise to more than £45,000 within four or five years.

HM Revenue & Customs also runs its own tax professional programme for graduates. The programme is designed to ensure that successful candidates are able to take up a senior tax position after four years. Initially graduates earn a minimum of £27,000, or £29,300 if they are based in London. In addition, a guaranteed minimum salary applies after two years in the scheme: £32,500 outside of London; £35,100 in the capital.

With large skills gaps to be filled and an age profile which needs to be reversed, graduate programmes are an excellent route into the sector for new talent that can start to address these critical public sector needs.

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Local government

There are two ways of getting into local government via a graduate scheme:

The National Graduate Development Programme (NGDP) has been set up by the Local Government Association and is a two-year course designed to prepare graduates for a career in management within local government departments. Since 2002 more than 700 people have completed the programme which includes a range of work placements and projects across the particular local authority. Participant salary and benefits starts at £23,500 per year (plus London weighting) and also includes the generous holiday and pension entitlement offered by the public sector. Many online case studies are available which demonstrate the variety available to graduates.

Very few places are available each year which means that competition is intense and thousands of high-achieving graduates miss out. These unsuccessful candidates are not lost though, and are instead retained within talent pools which local councils are encouraged to access to fill temporary vacancies.

Also on offer are many local council independent programmes which differ according to several factors such as budgets, local labour markets, and number of placements. For example, Kent County Council offers two schemes, one in management and one in finance which each pay £24,000. Whereas Lancashire County Council currently has just one graduate vacancy available: a trainee trading standards officer role on a salary of up to £19,000.

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NHS and Metropolitan Police Service

In England there are four separate streams within the NHS Graduate Management Training Scheme: Finance Management, Health Informatics Management, HR Management, and General Management all of which pay around £22,500 (excluding location allowance). Scotland, Northern Ireland and Wales each have their own scheme. Like many of the other graduate programmes, entry requires a minimum 2:2 degree or equivalent experience. An interactive website answers many of the key questions about the programme and also incorporates blog posts and video profiles of current participants or alumni to highlight the programme benefits.

The Metropolitan Police Service launched the Police Now graduate entry programme in late 2014 which aims to provide graduates with an attractive

and fulfilling alternative to a career in the private sector. Participants of the intensive two-year training programme will begin as Dedicated Ward Officers before progressing to Police Ambassadors with the option of entering a further fast-track scheme to later become Inspectors. At the time of its launch, the Met Police Commissioner said the scheme wanted to bring the perception of the police profession on par with others. The programme has been modelled on the education department’s Teach Now scheme and represents “significant innovations” in public sector recruitment. These innovations include an active social media presence to engage with prospective candidates and website video profiles which give an accurate and relatable snapshot of the benefits of the role.

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Public sector payIn 2014, median gross weekly earnings for full-time employees increased by 1% to £579 in the public sector, and by 0.7% to £493 in the private sector.A large gap opened up during the financial crisis of 2008 when private sector wages growth was basically halted. Last year was an exception to a recent trend as private sector pay has increased quicker since the recovery in 2010.

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1.0% from 2013

0.7% from 2013

Private sector wages are typically around 85% of public sector earnings

When comparing average earnings it is important to consider that the public and private sectors have workforces which are composed quite differently. These differences in weekly earnings do not reveal differences in rates of pay for comparable jobs as it is not always a like-for-like comparison.

For example, many of the lowest paid occupations, such as bar and restaurant staff, hairdressers, elementary sales occupations and cashiers, exist primarily in the private sector, while there are a larger proportion of graduate-level and professional occupations in the public sector.

£

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For men, approximately 80% of public sector employees work fewer than 40 hours per week while only 60% of private sector employees do the same. In fact, 25% of male private sector workers spend more than 45 hours working each week.

For women the difference is not as great, though the private sector has a greater spread; slightly more women work part-time (fewer than 30 hours per week) in the private sector than the public sector. Likewise, there are more private sector women working 40 hours or more.

Determining pay scales

The pay and terms and conditions of employment for many local government services’ workers are set out by the National Joint Council (NJC). The NJC represents local authorities in the United Kingdom and their employees and its principal role is to reach agreement, based on shared values, on a national scheme of pay and conditions for local application throughout the UK. These pay scales are also extensively used in the voluntary sector.

You can download the agreed 2015-16 pay scales via this link.

Within central government, collective agreements and Pay Review Body (PRB) awards differ significantly to the NJC agreement. For example, annual leave, maternity pay and other conditions are better in the NHS than in local government, though both are female-dominated workforces. Teachers’ holiday pay is far better than that of teaching assistants, who are covered by the NJC for Local Government Services. There is also a great pay discrepancy across different sub-sectors for the same or similar work. The difference is not just at the bottom either. Top earnings in the NHS Agenda for Change pay structure are more than double the NJC’s £42,000, despite jobs being comparable.

The 2014-16 NJC settlement with the LGA will leave the lowest hourly rate at only £7.06 in 2016 - still below the Living Wage to be introduced in April 2016.

Public sector pay expected to fall

OBR (Office for Budget Responsibility) projects that public sector pay will fall by 5.6 percentage points relative to the private sector between 2013-14 and 2018-19. If so, then the relative pay gap will be lower than its level in the early

2000s. In addition, cuts of more than 800,000 public sector jobs are already planned between now and 2018–19. The challenge for policymakers now is to manage a large fall in the public sector workforce and a fall in public pay relative to the private sector, whilst also seeking to retain high-quality workers at the same time. When managing future workforce cuts and pay squeezes, both the government and Pay Review Bodies (PRBs) need to pay great attention to indicators of whether the public sector is facing any difficulties in recruiting and retaining high-quality staff, and to decide on settlements in light of any such evidence.

In addition to earning higher wages,

public sector workers also tend to work fewer hours.

Department Lowest pay-rate (£/hr)

NJC (Local Government) £6.45NHS £7.31Further education £7.43Police £7.74Defra £8.05Cabinet Office £8.95Foreign and Commonwealth Office £9.41

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Pay differences by gender

For men: lower-educated men (GCSE or below) typically earn far more in the public sector. Whereas high-educated men (degree or more) receive better pay in the private sector

This could be fuelling a perspective that it is easier to earn more money at a job of lower standing in the public sector than it would be to climb the ranks in the private sector. As a result, higher-educated men could compete against lower-educated men for the same public sector roles. This means that those potential candidates without the same education qualifications will need to undertake further training to ensure they are skilled enough to still be considered for roles.

For women: public sector pay is higher in all categories. In stark contrast to men, the largest pay gap is for highly-educated women.

Overall, after accounting for differences in age, ethnicity, gender, and location, the gap for men is close to zero and for women it is approximately 8%.

Considering greater variation in public sector pay

Public sector pay is more uniform across the country, whereas private sector pay differs more according to location. Introducing greater local variation is one suggestion of how to spend Government funds more efficiently.

In 2011 the Chancellor recommended that staff pay should be determined by local labour markets. Previous reports have shown that as private sector nurse wages rise, so do hospital deaths in public hospitals. Likewise, higher private sector wages for teachers has led to a drop in overall GCSE results. Both these studies have shown that as the private sector becomes more attractive to top talent, public services suffer. The negative effect of paying below market rate is greater than the positives for paying above it.

The Government’s Pay Review Bodies (PRB) considered the recommendation but ultimately chose to maintain the national agreements in the NHS, prison service and civil service. Only the education department was given more freedom. There are now national minimum and maximum teacher salaries and schools are free to set staff pay within this range based on performance.

Before introducing widespread variation in public sector pay, the government needs to thoroughly weigh up all benefits and impacts of such a move. Clearly, more evidence is needed in order to truly make an educated decision. Evaluating the outcome of greater flexibilities in teacher pay (introduced in 2013) could provide useful evidence ahead of a broader implementation.

0% +8%

Pros of greater wage flexibility

Attracting top talent – local authorities could more easily match and adapt to local market rates

Service equality – high-quality staff in place within each authority will ensure public services are at a consistently high standard across the UK

Cons of greater wage flexibility

Added complexity – increased disparity would require more organisation of budgets and funding distributionPressure on wages from unions – targeting individual local authorities would be much easier than a centralised systemPoaching of talent – greater flexibility could lead to regions overpaying to attract the best talent from neighbouring authorities

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Attracting, recruiting and developing skilled young people should now be a critically important objective for any public sector organisation. Society depends on public services and as the digital age continues, a new wave of appropriately-skilled workers is going to be responsible for managing this change. This year’s Management Agenda survey by renowned leadership institute Roffey Park identified handling the multi-generational workforce as most likely to be the biggest organisational challenge in five years. In addition, talent management and succession planning has risen from 6th to 3rd on the list of largest current challenges for the public sector.

The candidates the public sector needs to target, Generation Y/Millennials, value self-worth, personal meaning and individualised development rather than status and security, which are favoured by older generations. The strategies which once attracted the public sector’s current leaders are no longer relevant to those who will be needed to replace them. The tools to build a diverse and skilled public sector workforce are already out there, and resourcing strategies must be built to embrace them.

For an introduction to the challenges faced in a multi-generational workforce, please download our whitepaper.

The future of the public sector workforce

An introduction to the challenges faced in a multi-generational workforce

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Build the EVP

A job (or career) in the public sector has plenty that should appeal to young talent: flexibility of work hours, the chance to make a telling contribution to society, opportunities for career progression and proximity to several departments, and pay which is typically higher than the private sector. Using these to build a compelling Employer Value Proposition (EVP) will create an identity which prospective candidates want to be a part of. A great current public sector example is Police Now, which was mentioned earlier in this report. It uses a powerful combination of short messages and images on their website to highlight the benefits of being a police officer from a personal, real-life perspective.

Tell the story

An important part of spreading the message is through real and relatable content. Many of the private sector organisations which excel in using their EVP to attract top talent use a diverse range of current employees to tell the story for them. The public sector is slowly adopting similar strategies and one excellent example is the Royal Navy’s Made in the Royal Navy campaign.

The Royal Navy recently overhauled its candidate attraction strategy to solve an issue they called “Sea Blindness” – a concern that not enough people knew why the Navy was important or what it actually did. A new high profile advertising campaign driving traffic to an innovative careers site was launched early this year. The campaign tells the unique stories and personal journeys of those that have already experienced life in the Royal Navy. It has been rolled out across multiple channels including TV, radio, print, digital and social.

Watch the 60 second TV ad Visit the careers page.

Although not many public sector organisations will have access to the big budgets invested in this super-slick marketing campaign, this example contains the sorts of valuable lessons the wider public sector can learn from in order to advertise the diverse, fulfilling and exciting opportunities which exist within the sector. Simple, real life examples, story-telling, and reaching out to candidates on their level and via the channels they use in their daily lives, can make a huge impact.

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In numbers: Made in the Royal Navy

202% increase in conversion of unique site visitors to finished applications, resulting in 9,897 applications in July 2015

182% increase in video engagement 74% increase in average duration

on website for mobile users 641% increase in traffic to core functions pages

Create and engage with talent pools

The concept of talent pools, or talent communities, is becoming more and more prominent. It is another example of where the private sector is showing the way forward. Harnessing the personal networks within our increasingly connected society can become a true competitive advantage for organisations. Cloud-based programs are rapidly emerging to offer services which enable businesses to develop and engage with groups of prospective candidates. They may not be ready to change jobs now, but by facilitating regular interaction with your organisation/department, you raise the possibility you’ll be front of mind when the time is right. Most platforms include current employees within

these networks and encourage them to submit referrals or even provide comments on candidates once they’ve begun a hiring process.

A hiring process for the future

New technology continues to make our personal and professional lives easier. Understandably, tech-savvy Millennials expect the same to happen to hiring processes. Removing red tape and complicated barriers to application will help attract talent who are used to having everything at the click of a button. Mobile optimisation, downloadable apps and smartphone video interviewing are all making it easier to connect with potential candidates and smoothly guide them through the hiring process in a manner which they can relate to.

Be both strategic and adaptive

Forecasting and workforce planning are essential to ensure public sector organisations remain attractive as employers, competitive as businesses and most importantly, continue to deliver public services of the highest standard. The ability to successfully balance a forthcoming mass-exodus of Baby Boomers, an influx of new technology and the diversity of a fluid workforce which is temporary, permanent, freelance and engaged on statements of work (among others) all at the same time will shape the success of the public sector going forward.

Making more of our digital lives Digital pioneer, founder of lastminute.com and chancellor of the Open University, Baroness Martha Lane Fox has challenged everyone to understand the internet better, more critically, and make more – much more - of our digital lives. As the presenter of 2015’s Richard Dimbleby Lecture, she raised issues which are particularly pertinent given the public sector’s known

struggles in the digital space. Watch the video here.

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References City of Westminster http://bit.ly/1NDaIqL

Deloitte: The ascent of digital http://bit.ly/1Fgf6Jt

E3 Media: Case studies – Royal Navy http://bit.ly/1iP2GOL

Essex County Council http://bit.ly/1FgfE1X

FT Adviser: Demographics to blame for serious skills shortages http://bit.ly/1ihq7j6

HM Treasury: Public spending statistics, July 2015 http://bit.ly/1ND818E

Institute for Fiscal Studies: Public sector pay in the UK http://bit.ly/12PAZxa

Institute for Fiscal Studies: Public service spending - more cuts to come http://bit.ly/1H4iLaC

International Business Times: Skills shortage threatens UK public sector reforms workers warn http://bit.ly/1KgFbVA

Leicester City Council http://bit.ly/1Lyg0Or

Leicestershire County Council http://bit.ly/1KRZOgs

Massie, S. 2015. Talent management: Developing leadership not just leaders. London: The King’s Fund. http://bit.ly/1NjFy65

Office for National Statistics: Annual survey of hours and earnings, 2014 http://bit.ly/11s9Lvn

Office for National Statistics: Labour market infographic http://bit.ly/1OYILXC

Office for National Statistics: Labour market review, July 2015 http://bit.ly/1OYILXC

Privacy Sense: Difference between private and public sector http://bit.ly/1Yckzr5

Public Finance: Auditors warn future Whitehall skills and talent shortage http://bit.ly/1F2EjY4

Recruiter: Quality not quantity – public sector recruiting http://bit.ly/1UWpm0H

Royal Navy: Made in the Royal Navy http://bit.ly/1LgXZbG

The University of Sheffield: Public and private sector employment across the UK since the financial crisis http://bit.ly/1cKlMSE

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Our priority is to simplify complex recruitment processes for our clients to reduce recruitment costs while significantly improving customer satisfaction and the quality of new hires.

If you would like to find out more about our services and how we can help you manage any aspect of your recruitment function, please do not hesitate to get in touch:

Interested in finding out the specific benefits your organisation could enjoy?

Please feel free to contact our advisors:

E: enquiries@guidantgroup.com

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W: www.guidantgroup.com/en-gb

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E: simon.blockley@guidantgroup.com

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