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Senior salaries show a downward trend

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Newly appointed chief executives are earning 14% less on average than their predecessors, according to the latest research by LGC into the pay of top council officers.

Data relating to the 15 chief executives appointed since January shows councils continuing to push down senior management costs as personnel change (see table, above).

The fall in salaries paid to new chief executives has continued, with new appointees paid 14% less than their predecessors in the first half of 2011, compared with 10% in the last six months of 2010.

Those averages do not include the six shared district council posts that have been created - three in 2010 and three in 2011 - where savings have ranged from 41% to 50%.

Once included, they push the average reduction to 15% in the latter half of 2010 and 23% this year (see first table below).

Over the entire 12-month period the reduction has been 18% - or 12% when the half-dozen newly merged roles are stripped out.

The figure reflects the fact that the number of internal appointments and first-time chief executives reached 53% and 60% respectively.

By taking the average salary change of councils appointing external candidates, we find a 14% change, below the 20% average in councils appointing internally. There is a similar difference between first-time appointees, (average drop 16%) and successful candidates with previous experience of the role (21%).

Looking at individual councils in the past six months, the biggest reductions came at Isle of Anglesey CC. The troubled council reduced its chief executive costs after the interim managing director, David Bowles, who was employed through consultancy Solace Enterprises, stood down. He was replaced by Richard Parry Jones - an internal, but still interim candidate - who accepted 56% less than his predecessor, despite the deepening of ministerial intervention in the authority.

Recruiters claimed candidates generally accepted the new reality of the job market. One pointed out that generous redundancy and pension packages could make smaller salaries more appealing.

Simon McDonald, head of local government at Odgers Berndtson, said the depression of salaries had not led to a reduction in the number of good-quality candidates.

Pointing to “fantastic appointments” at places such as Islington LBC and Newham LBC on 24% and 20% less, he said “it has not been the disaster that people were predicting”.

“We have seen a considerable drop in salary levels but we have not seen a lessening in the quality of the candidates,” he said.

Despite the higher average figure for reductions in salary, there were some individual councils that actually increased the amount they offered to chief executives this year.

In the last six months of 2010, LGC found no councils paying more for their incoming candidate than their predecessor, although there were four who reported no change in salary.

In the first six months of 2011, four councils showed an increase in salary cost, ranging from 4% at Wirral MBC to a much larger increase of 46% in Wyre BC.

The latter is the result of the first break-up of a shared chief executive arrangement after Wyre’s leadership decided not to continue the arrangement with Chorley BC once Donna Hall departed to become Wigan MBC’s deputy chief executive.

Wyre has appointed an internal candidate and deleted his previous post and a spokesman said this meant the council was saving £90,000 a year on the pre-sharing salary of £104,000.

Daventry DC is a similar example of where the salary paid to the new chief executive has risen but costs have been reduced elsewhere to offset the additional expense.

Before March this year, Daventry rotated its head of paid service responsibilities around its three directors who each earned £80,856, but financial circumstances led it to create a two-person senior management team of one chief executive and one director, with one of the trio made redundant.

Both examples open a window on to the other downward pressures on management and workforce costs aside from downward pressures on senior salaries: restructures and reductions in the number of posts.

However, there are exceptions to the rule and Eden DC has appointed a more expensive, interim chief executive but does not yet know where the savings will come from to make up for the £21,000 salary increase.

A spokesman for Eden DC said the decision was a deliberate strategy. He explained that the council had chosen to make a more expensive interim appointment as a form of investment.

“The solution was to appoint an interim chief executive with a clear remit to address budget issues,” the spokesman said, and the council believes future savings will “more than compensate” for the extra cost.

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Readers' comments (1)

  • Why a more expensive interim can turn out cheaper

    I read with interest the article about chief executive pay. In comparing existing salaries with the previous occupants’, one factor is often overlooked that is important for comparison – on-costs.

    For example, in local government the average on-costs are 25% of salary. An interim manager or “consultant employee” does not incur on-costs in the same way. So, where an interim manager costs a council £100,000 and the previous incumbent was on a salary of £88,000, at first sight it looks as if the interim manager is costing more. However, when on-costs are added at £22,000 (25%), the comparable figure is £110,000. The interim manager is therefore £10,000 cheaper than the permanent role.

    There are many other issues to have regard to when considering whether to employ a permanent employee or even appoint an internal candidate for an interim period.

    The debate on that will run but the feedback I often receive is that it provides an opportunity to transform and change. That brings with it a value (not directly one of money) and can indirectly provide other benefits. From my own experience there is room for all options and the opportunity to engage interim managers is one that can deliver tangible results.

    Robin Hooper, director, Public Services Group, Gateley LLP

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