Specialist Pay
3.25 Specialist Pay is paid to specific groups within the Armed Forces to assist with recruitment and retention. The rationale for payment may be internal (to attract existing personnel into particular cadres) or in response to external market forces, or a combination of these. Around 40 per cent of personnel receive SP at an overall annual cost of about £121 million, with the greatest expenditure on SP(Flying) and SP(Submarine). Some types of SP are paid continuously where the specialism is fundamental to the core role of the individual, and will remain so. The reserve banding arrangements described below provide a degree of protection for such personnel if they move temporarily to a non-SP post. Other types of SP are paid non-continuously only to those serving in a particular post, or doing a time limited task, that attracts SP...
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3.26 In December 2010 MOD asked us to undertake a comprehensive review of SP during this round. It indicated it would submit evidence to us for a full review of all SP cadres, to identify how to deliver the most effective focus on recruitment and retention. We therefore sought views on SP from Service personnel in the course of our 2011 visits programme. It became clear to us that there were widespread misconceptions about the purpose of SP which many saw as rewarding skills acquisition or compensation for risk, rather than as a tool to support recruitment and retention of certain trades (its core rationale).
3.27 We also heard a range of concerns about the effective targeting and detailed conditions for receipt of SP. Some who did not receive SP questioned its payment to those who were not actually undertaking the activity for which SP was nominally paid; others were concerned that SP was not available to particular cadres for whom retention was a problem, or was not paid at a sufficient rate.
3.28 Under reserve banding rules, individuals receiving SP on a career continuous basis continued to receive full payment for the first three years in a non-SP post, with the rate then decreasing annually to 75 per cent, 50 per cent and 25 per cent before being stopped. However, MOD announced in January 2011 that with effect from April 2012, SP will reduce by 50 per cent for those in year three of a non-SP tagged posting before stopping altogether in year four. The announcement was not well received by Service personnel, particularly as there has been a move towards longer, three-year postings in some areas.
3.29 We continue to hear concerns about MOD’s announcement that it will completely withdraw SP from those who submit notice to terminate. This could mean, for example, that submariners may be required to serve at sea for several months during their notice period without receiving the same SP as those working alongside them. While we understand that it can be argued that if someone has said they are leaving, SP has not served its retention purpose, we have a particular concern when the situation relates to someone who has already served a full career, so demonstrating the effectiveness of SP in retaining them to date.
3.30
We strongly encourage MOD to reconsider its decisions on reserve banding and on withdrawing SP from those submitting notice to terminate, before the announced cuts come in to effect.
MOD evidence
3.31 MOD submitted evidence on a suite of proposals for change to the overall approach to SP, to reinforce its purpose as a recruitment and retention lever and to enhance flexibility. These included a change of name, a more flexible process for reviewing the appropriateness and levels of SP and proposals for further work on a number of detailed issues (such as receipt of multiple forms of SP and the interaction with return of service commitments). We also received detailed papers which set out the assumptions and bases for individual cadres, but these made no proposals for change this year. MOD explained in further evidence that its thinking on the review had developed since December 2010 and it now envisaged a more evolutionary approach, with some more fundamental changes to SP integrating with wider pay reform under the NEM programme.
Our analysis
3.32 We welcome much of the thinking underpinning the MOD proposals. The current system of SP has evolved over many years and gives rise to a number of questions about discrepancies in treatment between different groups. Issues include the justification of levels of payment and the interaction with other payments which have a recruitment and retention rationale, such as pay spines and Financial Retention Initiatives (FRIs). However, we believe MOD needs to do further work to articulate its strategic approach on recruitment and retention payments before we can consider properly the merits of detailed changes to SP. Clear guidelines are needed for testing the appropriateness of using SP (or other recruitment and retention tools) for specific cadres. Such work is, in our view, part of the essential underpinning for other changes to the pay system under the NEM, and should be progressed sooner rather than later. It would also promote a clearer understanding on the part of Service personnel of when such payments may, or may not, be appropriate.
3.33 Regarding MOD’s detailed proposals, we particularly welcome the intention to develop a system for annual review of manning in SP cadres, enabling a more flexible and agile approach to aligning levels of SP with the defence requirement. We also agree that Specialist Pay is a misnomer and that another term is desirable to emphasise that these payments are intended to address issues of recruitment and retention in particular trades.
3.34 We believe that some important issues need to be resolved before proceeding, and we invite MOD to develop further proposals before we endorse any specific changes. The issues on which we seek further evidence are:
• The MOD’s strategic approach to recruitment and retention payments, including the respective rationales for pay spines and for SP. It is not clear to us why some groups are on pay spines, which provide certainty of long term payment (which is pensionable), while others receive SP which is in principle a temporary payment (and not pensionable), although in practice the expectation of many receiving it is that it will be permanent. The career-continuous basis of some SP reinforces this and appears to us to resemble a pay spine. Clarity on the underlying rationales would enable a strategic review of their appropriateness in relation to specific cadres and the potential interaction with other return of service commitments including FRIs;
• Safeguards which would be needed in a more agile model in which SP might increase or reduce in the light of revised manning needs. Given that many service personnel have been in receipt of SP for long, continuous periods, and have made commitments in expectation of its continuation, we expect to receive proposals which would ensure individuals have a degree of protection from sudden reductions in pay. Options might include preserving payments for individuals already receiving SP, or reducing payments progressively over a period of years, to ease the transition;
• Fuller proposals on how the more dynamic review process would work to enable us to consider an annual analysis of the manning of SP earning cadres, and associated proposals for changes to the levels of payment which would be better matched to current recruitment and retention requirements. We would welcome a presentation of evidence on a ‘shadow’ basis next round. We can then consider this in detail and assess whether the approach would provide the evidence we need to make firm recommendations in future. The evidence should also cover arrangements for assessing the case for SP to be awarded to a group or groups not previously covered.
3.35 We would like MOD further to develop its proposals to ensure SP better supports current recruitment and retention needs, including a more dynamic review process, to enable us to make detailed recommendations in 2013.