Civil service workforce: Recruitment, pay and performance management

The time taken to recruit staff across the civil service is too slow. It takes an average of 99 days to hire new staff in the civil service, from the job being advertised to completing basic pre-employment checks. Completing security checks for new recruits can take on average an additional 171 days for candidates requiring the highest level of security clearance. The Cabinet Office acknowledges that civil service recruitment times are slow, particularly compared with private sector firms, and asserts that it is confident these can be reduced. Recruitment times vary across departments, but departmental data on recruitment and security vetting times are patchy and inconsistent, hindering efforts to understand how departments could speed up recruitment. As a first step, the Cabinet Office has set out how departments should measure recruitment times for civil service roles. But the challenge will be to make sure departments record and report recruitment times accurately, so that performance can be benchmarked with the aim of making recruitment faster. Recommendation 2: By the time of its Treasury Minute response, the Cabinet Office should require all departments to report data on recruitment times to it on a consistent and regular basis. It should use this information, along with data from external comparators, to establish benchmarks for recruitment times within the civil service.

Most departments do not know how much it costs to recruit staff, or how they could be more efficient. 14 of the 16 main departments cannot provide full recruitment cost data. Only one department, HM Revenue & Customs, understands its recruitment costs well enough to be able to calculate its cost per hire, which is a standard metric for assessing the efficiency of an organisation’s recruitment processes. The Cabinet Office says it is developing a way of measuring and benchmarking recruitment costs consistently across departments. As part of this, it needs to specify how departments can estimate the cost of all staff time spent on recruitment activities, including that of line managers involved in hiring staff, given most departments struggle to report this cost. In addition, most departments 6 Civil service workforce: Recruitment, pay and performance management have not sought to learn from others how to make their recruitment processes more efficient. This is despite there being identified examples of good recruitment practice within the civil service, such as HM Revenue & Customs on recruitment costs and the Ministry of Justice on increasing the diversity of those it hires. Recommendation 3a: By the end of 2024, the Cabinet Office should define a common cost per hire measure that includes the cost of all staff time spent on recruitment, and require all departments to report to it regularly on their full cost per hire. b) The Cabinet Office should, within six months, share examples of efficient recruitment from within the civil service and external organisations, to encourage departments to identify improvements to their own recruitment processes.

Chronic pay issues within the civil service have lowered morale and risk departments not being able to recruit and retain skilled staff. The Cabinet Office acknowledges that there are longstanding issues within the civil service relating to pay and reward. These include a long-term decline in real-terms pay, which has reduced levels of staff satisfaction within the civil service. As departments can set their own pay scales, there are also persistent disparities in how much people at the same grade are paid in different departments. There is also a lack of coherence in how departments use pay to reward civil servants for good performance. We are concerned that these issues damage departments’ ability to attract and retain staff, including specialist staff where salaries in the private sector can be particularly competitive. The Cabinet Office has promised to introduce a new pay and reward strategy for staff below senior civil service level in 2024. So far, however, there is little specific detail in the Civil Service People Plan on what the new strategy will involve and how it will address long-term pay issues. Recommendation 4: In its forthcoming civil service pay and reward strategy, the Cabinet Office should clearly set out the specific actions it will take to address longstanding issues such as declining real-terms pay; variation between roles paid at the same grade; and disparities in pay between departments, including disparities in the use of performance-related pay and the risk of indirect discrimination.

Departments do not collect enough data on staff underperformance to know if it is being managed effectively. Some departments do not routinely collect data on the number of staff who are underperforming in their organisations, and most do not monitor what happens to staff who are identified as underperforming. Without these metrics, departments cannot accurately tell whether performance is being effectively managed, and underperformance identified and addressed. If government is to achieve its ambition of a smaller, more highly skilled civil service, it will become increasingly important for departments to understand and manage underperformance. The Cabinet Office is focusing on improving the capacity of line managers within departments to deal with issues locally, which it sees as fundamental to raising performance levels. But it accepts that it could improve performance reporting, particularly as better departmental data will be needed to understand how effectively line managers are tackling underperformance. Civil service workforce: Recruitment, pay and performance management 7 Recommendation 5: By the time of its Treasury Minute response, the Cabinet Office should mandate all departments to collect data on the number of underperforming staff, how underperformance is being managed, and the outcomes for underperforming individuals. 8 Civil service workforce: Recruitment, pay and performance management 1 Civil service staffing and recruitment

On the basis of a report by the Comptroller and Auditor General, we took evidence from the Cabinet Office, HM Revenue & Customs (HMRC) and the Ministry of Justice about civil service recruitment, pay and performance management.1

However, the commitments and metrics in the Civil Service People Plan do not set out target or expected levels of performance against which the Cabinet Office can measure and evaluate the success of the Plan. For example, recruitment times will be measured using a common time to hire metric, but the Cabinet Office told us it was not yet able to specify a benchmark for how many days it should take departments to hire staff.9 The People Plan also does not say how it will improve the poor state of much departmental workforce data, such as recruitment costs. The Cabinet Office said it was working to improve the data picture, for example by benchmarking all of the costs involved in recruitment.10 However, it acknowledged the broader point that departments were at different stages in terms of the quality of their HR systems and the quality of data in those systems.11 Recruitment times

The time taken to recruit staff is a key indicator of the efficiency of an organisation’s recruitment process. Recruitment times can be measured in a number of ways, including the time it takes from starting a recruitment campaign to making a firm employment offer – often referred to as ‘time to hire’. Organisations may also measure ‘time to fill’, or the time it takes to get a new staff member recruited and in post, which includes time taken for pre-employment and security vetting checks.12

The Cabinet Office told us that it had agreed a standard definition of time to hire with departments, defined as the time taken from a job advertisement being published to a job offer being made.13 Using a similar definition, the average time to hire across all departments in 2022 was 99 calendar days, based on departments’ reported recruitment times. Security clearance vetting time was on average an additional 171 calendar days, for recruits requiring the highest level of security clearance.14 The Cabinet Office recognised the current time to recruit was too long and said that it was not satisfied with the situation. It noted that recruitment best practice in the wider economy resulted in hiring times that were about half that reported by government departments.15

The Cabinet Office acknowledged that departments did not collect consistent and comparable data on how long it takes to recruit and vet candidates.16 The Cabinet Office told us it is working to improve the understanding of recruitment times across the civil 8 Cabinet Office, Civil Service statistics: 2019, 24 July 2019; Cabinet Office, Civil Service statistics: 2023, 2 August 2023 9 Qq10, 15 10 Qq29, 31 11 Q97 12 C&AG’s Report, para 2.4 13 Q10 14 Q12; C&AG’s Report, paras 10–11 15 Q12 16 Q13; C&AG’s Report, paras 2.4, 2.8 10 Civil service workforce: Recruitment, pay and performance management service, including by setting common metrics for time to hire and time to fill that should result in more consistent, better-quality data that can be used to benchmark departmental performance.17 However, the People Plan states that its recruitment time metrics will only be reported for departments that are Government Recruitment Service customers, rather than all departments, which reduces the completeness of benchmarking that can be done and hence its usefulness.18 Recruitment costs and efficiency

Most departments—14 out of the 16 main civil service departments in 2022—do not collect full information on their recruitment costs and therefore do not understand how much it costs them to hire staff. The Ministry of Justice told us that, in common with most other departments, it does not track the cost of staff time spent on recruitment activities by line managers involved in hiring staff.19 HMRC is the only department that is able to calculate its cost per hire, a standard measure for assessing the efficiency of recruitment processes calculated by dividing total recruitment costs by the number of people recruited. HMRC attributed this to the fact that its recruitment is largely centrally run by HR or specialised teams. Having centralised recruitment processes means HMRC is more readily able to capture data on the time spent on recruitment activities and the cost involved.20

The Cabinet Office noted that it was seeking to improve cost data and was benchmarking all costs associated with recruitment, which would enable departments to compare cost elements such as those for advertising or employment checks.21 However, there are no metrics on recruitment costs in the Civil Service People Plan, such as cost per hire, that departments will need to report against.22 The Cabinet Office did not confirm whether it would require departments to report recruitment costs consistently, particularly those costs that departments struggle to report such as the cost of hiring managers’ time spent on recruitment. Instead, the Cabinet Office stated only that departments had “very strong incentives” to understand how to lower their recruitment costs.23

Most departments do not know how their recruitment performance compares to that of other organisations, either within the civil service or externally. In part this is due to the poor quality of recruitment data, as described above in relation to recruitment times and costs. The Cabinet Office explained this was why it was developing common metrics to enable departments to understand, compare and benchmark their performance internally and externally.24

Improving recruitment performance will also involve learning from the experience of others and from external best practice. We heard several examples of efficiency and good recruitment practice within the civil service, such as HMRC on recruitment costs and centralised recruitment, and the Ministry of Justice on ensuring the diversity of staff 17 Qq10–11 18 Cabinet Office, Civil Service People Plan 2024–2027, 10 January 2024 19 Qq 27–28; C&AG’s Report, para 12 20 Q30 21 Qq29, 31–32, 53 22 Cabinet Office, Civil Service People Plan 2024–2027, 10 January 2024 23 Qq30–33 24 Q50 Civil service workforce: Recruitment, pay and performance management 11 recruited.25 The Cabinet Office acknowledged it has a clear role to share best practice and promote learning across departments, given its oversight and coordination role for the civil service workforce. It said it was already working hard to share best practice across departments, for example what departments are doing to reduce time to hire, and undertook to share learning from departmental exemplars on recruitment costs.26 25 Qq16, 52 26 Qq34, 53 12 Civil service workforce: Recruitment, pay and performance management 2 Pay and performance management Civil service pay

As part of their employer responsibilities, departments are delegated the authority to set pay for their staff below SCS level. Each department sets its own pay structure which defines pay rates for each grade. Annual pay increases are governed by the central pay remit guidance issued by the Cabinet Office, which specifies the maximum amount that civil service pay can go up each year.27

Civil service pay for almost all grades has seen a long-term decline. Since 2013, civil service median pay has decreased in real terms for all grades apart from the most junior grade (Administrative Assistant).28 The Cabinet Office recognised that declining real-terms pay was a “chronic” problem affecting the civil service that was “storing up increasing problems of competitiveness with the wider economy”.29 The Cabinet Office further acknowledged there was evidence that pay affected departments’ ability to recruit, citing unattractive pay as the typical reason for failed recruitment campaigns resulting in no appointable candidates.30 It added that government had sought to address the impact of pay on civil service morale. In particular, the Cabinet Office had responded to civil servants’ decreasing satisfaction with pay by making an improved pay offer during 2023, including a one-off £1,500 payment to all civil servants below SCS level.31

Other longstanding civil service pay issues include the existence of pay disparities between departments for staff at the same grade level. For example, differences between the higher executive officer (HEO) pay band at the Department for Environment, Food & Rural Affairs (Defra) and HMRC mean that the highest HEO salary in Defra’s pay structure is £1,601 less than the lowest HEO salary HMRC offers.32 Additionally, as at March 2022, senior executive officer (SEO) median salaries varied by up to £6,100 across departments.33 Pay disparities can lead to unhealthy and unproductive competition among departments for staff, for example where there are several departmental employers in a local area or where departments are trying to attract staff with scarce specialist skills.34 The Cabinet Office told us pay disparities of this kind might reflect differences in jobs in different departments, even though those jobs had been graded at the same level.35 However, it did acknowledge that departmental pay differentials in the same location could “add tensions” and that there might be a case for greater pay coherence across departments where jobs at the same grade were more similar.36

Departments vary quite substantially in their approaches to performance-related pay, including how much they spend on it. For example, departmental per-head spending on performance-related pay in 2021–22 ranged from £13 to £1,366 per employee, for staff 27 C&AG’s Report, para 3.2 28 C&AG’s Report, para 1.10, Figure 6 29 Q56 30 Q54 31 Q56 32 C&AG’s Report, para 3.4 33 C&AG’s Report, para 3.5 34 C&AG’s Report, paras 16–18 35 Qq60–62 36 Qq63–64 Civil service workforce: Recruitment, pay and performance management 13 below SCS level.37 The Cabinet Office expressed surprise about the level of variation in departments’ performance-related pay arrangements, remarking that the extent of this variation was higher than it would have expected. It added that the new pay and reward strategy promised in the Civil Service People Plan would need to look harder at the role performance-related pay should play in the civil service, with the intention of rewarding employees for higher output and higher quality of work.38 We also asked the Cabinet Office how it guards against the risk of indirect discrimination where the quantity and quality of an individual’s work may be measured more easily in some roles than in others. It told us that objective data will become increasingly available in this area, and that there are “some checks and balances” in how people moderate performance across individuals.39 Performance management

Performance management for civil service staff below SCS level is another responsibility delegated to individual departments. This has resulted in differences among departments in how they manage staff performance and support employees’ development. In particular, there is no common civil service-wide approach for identifying and dealing with staff underperformance in grades below the SCS.40 This has resulted in some departments not routinely collecting data on the number of underperforming staff in their organisations. HMRC, for example, told us it decentralised its performance management system to line managers when it introduced a new system in 2018, which means that it no longer collates central data on the number of underperforming staff.41

Further, most departments do not monitor or report what happens to staff identified as underperforming. Monitoring outcomes for underperforming staff is essential if departments are to understand how effectively their performance management systems are supporting people to move out of underperformance or identifying alternatives for those individuals, such as changing roles.42 The Cabinet Office noted there is a balance to be struck between the time departments spend on collecting and reporting data and the time they spend on supporting managers and teams to improve performance.43 However, this is slightly at odds with the Cabinet Office’s own civil service performance management framework, which sets the expectation that departments “must track and be able to report on the progress being made with each individual” identified as underperforming.44

The Cabinet Office’s approach to dealing with staff underperformance, and raising performance levels more generally, is based on improving the confidence and capability of line managers in departments. The Cabinet Office told us that as part of work to implement the Civil Service People Plan, it is setting standards that line managers will need to work towards and is providing training to support line managers.45 However, it is hard to see how performance management in the civil service can be evaluated and improved without good data on the numbers of employees moving into and out of underperformance. If underperformance numbers and outcomes are not measured, it is not clear how 37 C&AG’s Report, para 21 38 Q101 39 Qq107–109 40 Q83 41 Q79 42 C&AG’s Report, paras 4.13, 4.15 43 Q83 44 C&AG’s Report, Figure 15 45 Q81 14 Civil service workforce: Recruitment, pay and performance management departments will be able to tell if their line managers are managing underperforming staff effectively, or more broadly, whether some departments have particular issues with levels of staff underperformance. The Cabinet Office recognised that there was scope to improve reporting in this area, and said it would work with departments to understand how best to do that.46 46 Qq84, 90–93 Civil service workforce: Recruitment, pay and performance management 15