National Audit Office publishes report on Civil service workforce: recruitment, pay and performance management

Government has significant opportunities to improve the efficient management of its workforce, including recruitment, pay consistency and performance management, a new National Audit Office report has found.

EU exit, COVID-19 and the cost-of-living crisis have all resulted in increased workload pressures on departments, met by rising staffing numbers and costs.

This study identifies variations in how departments recruit, pay and manage the performance of staff below senior civil service level. It does not evaluate or examine the reasons for different departmental approaches to recruitment, pay and performance management.

Civil service salary costs have risen in recent years, largely as a result of increased civil service numbers. In 2013, civil service headcount was 443,390 with total salary costs of £11.4 billion. By 2022, civil service numbers had increased to 510,080, with total salary costs of £16.6 billion.

Despite the overall increase in civil service numbers and costs since 2013, real-term median salaries have fallen over this time for almost all civil service grades. For example, the median pay of Grade 6 civil servants fell in real terms by nearly £7,000 from 2013 to 2022, from £74,600 to £67,700.[1] In 2022, London-based civil servants had a higher median salary (£39,000) compared with those in the rest of the UK (£28,000).

Recruitment

Recruitment times vary, with the slowest department taking on average 38 days longer to recruit than the fastest. Only HMRC and DCMS could provide data on their full recruitment costs, meaning 14 of the 16 main civil service departments do not know how much it costs them to recruit staff.

Departments reported annual spending on recruitment costs of up to £26 million in 2021-22, and the NAO calculated the highest cost per hire was £6,176 (HM Treasury). For comparison, the Chartered Institute of Personnel and Development reported an average cost per hire of £1,500 in 2022, across private, public and not-for-profit sectors.

The Government Recruitment Service (GRS), part of the Cabinet Office (CO) which provides recruitment services to departments, saw its staffing cut by 40% in 2022 as civil service recruitment volumes were expected to decrease. In practice, volumes increased and CO warned that GRS operations were becoming unsustainable. Ministers increased staffing from July 2023, averting the risk of service failure. CO needs to set out full costs and benefits before establishing whether delivering recruitment services itself is an efficient model for civil service recruitment.

In July 2023, the CO committed to working with departments to set out more consistent metrics on recruitment times and costs, which should enable it to benchmark future performance.

Pay

Different departmental pay structures mean some departments pay significantly more than others for staff at the same grade. For the higher executive officer grade at the Department for Environment, Food and Rural Affairs, the national pay band is £30,317 to £32,803, while HMRC's pay band for the same grade is £34,404 to £36,985.

Pay differentials exist between departments for some specialist staff. For digital professionals, the lowest departmental median Grade 6 salary across departments was £60,400 and the highest was £73,500, a difference of £13,100.

The CO monitors departmental pay variations but does not coordinate departments to align approaches to civil service pay where this could be beneficial, for example, in avoiding the potential undesirable effects of departmental competition on pay for local or specialist staff.

Performance management

Three out of sixteen departments could not identify how many underperforming staff they had in 2022, and almost two thirds do not know what happens to staff after they are classified as underperforming. Departments also vary in the number of employees that each line manager is responsible for, under their performance management systems. The line manager to employee ratio varies from 1:1.4 to 1:6, with a median ratio of 1:2.5.

Departments vary in their approaches to performance-related pay and how much they spend on it: in 2021-22, per-head departmental spending on performance-related pay for staff below SCS ranged from £13 (HMRC) to £1,366 (DfT) per employee.

Recommendations

The NAO recommends the CO requires departments to report regularly on consistent metrics for recruitment cost per hire and average time to hire, so performance can be benchmarked. On pay, the CO should report on civil service pay differentials across departments, starting from 2024-25, and work with departments to address pay differentials where this would be beneficial.

The CO should work with departments to help them assess the effectiveness of their own performance management systems, considering data on outcomes for staff and employee feedback. Human resources directors should also report to their departments’ executive committees on the number and grades of staff identified as underperforming and what happens after staff are identified as underperforming (see Notes to Editors).

Gareth Davies, the head of the NAO, said:  

“Some variation in how departments organise and manage their workforces is to be expected given the different functions and services they deliver. However, our analysis indicates that there is scope to improve efficiencies in crucial areas such as recruitment costs and managing underperformance. 

“The Cabinet Office has a fundamental role to play in requiring departments to collect consistent HR data and helping them understand where and how efficiency could be improved. It also has a responsibility to minimise unintended effects such as departments competing against each other for staff

“The Cabinet Office and departments need to work together more effectively to drive efficiency and help the civil service meet the challenges and pressures it faces.”

ENDS

Notes for Editors

1. A full list of NAO recommendations can be found in the report summary. 
2. The report looks at the 16 main civil service departments in place as at 1 January 2023. There are now 17 main departments, following machinery of government changes announced in February 2023.