Newly appointed chief executives continue to be paid less than their predecessors - by an average of 10%, according to the third LGC Salary Tracker.
More from: LGC view 26 January 2012: Senior pay
However, the latest data, covering appointments between July and December 2011, shows a smaller average reduction than the 19% seen in the previous period, prompting speculation that senior salary levels may be finding their ‘natural’ level.
Recruitment consultants close to the sector have predicted that new appointments will continue to be made on salaries 10% below those of their predecessors.
Odgers Berndtson’s head of local government practice Simon McDonald said: “Salaries will stabilise where they are now.
“The debate has moved on and the correction to salaries has happened - we’re not seeing ministers talking about ‘council fat cats’ with quite the energy or frequency as before,” he added. “I suspect, if they look at LGC’s figures, they think the job has been done.”
And while the decline in salary levels appears to be levelling off, LGC’s research also showed that councils were increasingly finding savings from their overall senior management costs by abolishing or sharing the position of chief executive.
The third LGC Salary Tracker showed that councils making a change to their top officer positions during the period had secured savings of 27%, compared with 23% in the second tracker and 15% in the first. See below for the latest average pay by type of council.
It is impossible to tell whether it was ministerial intervention or financial reality that triggered the drop in salaries.
Mr McDonald said he believed the headlines generated by the secretary of state did have a role.
“I think ministers gave members permission to have a look at salaries,” he said.
“There was a bit of an orthodoxy that we had to keep paying more and more and more. The debate enabled local authorities to question whether that was true.”
Others are sceptical. Graeme McDonald, Solace’s director of policy and communications, said: “The hysteria about chief executive pay was always unreasonable. We expected new hiring salaries to be re-set to take account of lower turnover and general wage damping. We have always said there is a market and it works.”
LGC’s research showed an increasing trend for councils to appoint internal candidates rather than go to the market. The figure has consistently been more than half of all appointments since the first LGC Salary Tracker, but that has now shot up to 76% .
This is a cause of concern for some. Mary Orton, honorary secretary of Alace, said it was “a rather worrying trend if it meant either that councils were no longer opening up competition to outsiders, or if it meant the salaries on offer were too low to attract external candidates”.
Simon McDonald agreed councils might find it “easier to negotiate a lower salary with an internal candidate who has been eyeing up the top job” but said there was nothing wrong with promoting existing staff rather than looking elsewhere.
“It is expensive and risky to recruit externally. Perhaps councils are a little more risk averse about outside appointments. The scale of the challenges faced perhaps means it is better to look for someone internally, who knows the organisation,” he said.
Opinion is also split on whether or not a lower salary equates to a candidate with less talent. Simon McDonald said the quality of candidates had not been affected - instead salary expectations had been adjusted.
The Public Sector People Managers’ Association also said good candidates were still being found, but warned councils against blindly following the trend for smaller salaries.
A spokesman said: “The challenges facing chief executives continue to grow in what are extremely difficult times and councils need to make sure they attract top-quality candidates.
“What we want to avoid is councils following the trend for reducing salaries without thinking about the particular person they want for the job.”
Similarly, Jonathan Flowers, partner at Veredus, said: “In some cases councils could arguably have got better appointments or stronger fields if they had paid more, but we aren’t yet seeing authorities deciding not to appoint from the field they get. When that starts happening it will be a signal of the tide turning back to purer supply and demand.”
For more graphs from the LGC salary tracker, see pdf attached, right