National Audit Office report on managing the BBC's pay bill

By agency reporter
May 17, 2019

The BBC has taken significant steps to improve the consistency, transparency and fairness of its staff pay and working practices, and is well ahead of other organisations on pay transparency and the gender pay gap. It now needs to ensure it has stronger oversight of its costs at the top of the organisation according to a new report by the National Audit Office (NAO).

In recent years there has been a lack of confidence in BBC pay policies and the fairness of its practices and in 2017, the NAO reported on workforce management. The BBC undertook a series of wide-ranging reforms between 2015 and 2018 to standardise and simplify its workforce management for public service broadcasting (PSB) employees. This has improved consistency in job structures, pay, and terms of employment.

From 2016, the BBC has developed a new job framework for staff, including senior managers. 5,000 job titles were grouped into 600 jobs across six pay bands. This was a considerable achievement to move away from managers having discretion over pay and allowances, to establishing a centrally controlled, benchmarked and market-informed approach. 

The framework has resulted in nine per cent of public service broadcasting staff being in jobs with pay ranges higher than the market median, which the BBC believes is important to attract ‘in-demand’ skills that command high salaries, for example in digital roles. For remaining staff, 87 per cent are in jobs with pay ranges in line with the market median and four per cent have pay ranges lower than the market median.

While reducing costs was not a driving factor for the BBC’s reforms, it does expect to see a net saving of £4.9 million over seven years. This equates to less than 0.1 per cent of the total staff pay-bill over that period. While the BBC had a detailed cost model and the Board had high-level oversight of progress, there was no evidence that the BBC had put in place sufficient arrangements for detailed oversight and challenge of the costs and savings involved while completing its terms and conditions review. The BBC is yet to estimate the financial savings associated with the wider benefits of its changes.

Work to apply these reforms in the BBC’s commercial subsidiaries is less advanced than in PSB. It has already removed eligibility for bonuses from 870 staff in BBC Studios whose performance does not have a direct impact on profits, consolidating these bonus payments into their salaries, while a remaining 575 staff continue to receive a bonus. The BBC needs to implement changes carefully to ensure it achieves its aim of allowing people to move betweenpublic service broadcasting (PSB) and commercial subsidiaries, while also keeping its commercial pay competitive.

Implementing reforms to scheduling and working patterns is a significant challenge for the BBC that will require considerable culture change. For example, the reforms include replacing complex rules on flexible working, with a simpler, consistent approach. Unions expressed concerns to the NAO that not all managers had bought into the reforms yet and some members were nervous about the changes. 

The BBC has set itself a challenging gender pay gap of plus or minus three per cent by 2020. Staff have been given the opportunity to raise concerns about past pay and the BBC has concluded the majority of queries. The BBC has narrowed its gender pay gap from a median of 9.3 per cent in 2017 to 7.6 per cent in 2018, which compares favourably to other media organisations.  

The BBC has improved its transparency in relation to pay, both internally and externally and has been noted in two independent reviews as among the UK leaders in pay transparency. Since 2017, it has published the salaries of all senior managers and on-air staff and freelancers earning over £150,000 in PSB in £10,000 bands and, from the next annual report, in £5,000 bands. The BBC also publishes the ratio of both the Director General’s and executive directors’ earnings to BBC staff median earnings and its pay gaps for other characteristics, including race, disability and part/full-time staff.

The NAO found the number of senior managers in PSB reduced from 382 to 245 between 2014-15 and 2018, 1.3 per cent of the workforce. This includes a reduction of 21 senior managers when BBC Studios, previously part of PSB, became a commercial subsidiary in 2017-18. A more fundamental review of BBC senior leadership was carried out in 2018. This led to new job descriptions and market-informed pay ranges for senior managers, with the size of the annual pay increase received by an individual senior manager being partly dependent on performance.

The BBC reduced spending by PSB on those in on-air roles from £194.2 million to £147.6 million between 2013-14 and 2017-18, and kept overall spending on those roles below its target of no more than 15 per cent of expenditure on original in-house content. However, inflationary market pressures created by new market entrants, such as Netflix, may affect the BBC from maintaining this trend. Since 2017-18 the BBC has focused on individuals, within cohorts of people that perform similar roles such as sports pundits, to track and manage inflationary pressures.

The BBC has reformed pay for its approximately 850 on-air staff. It has implemented a new framework for determining their pay, which includes a new, bespoke pay band for its most senior 100 to 150 on-air presenters. Eight men and two women in this band who were significantly above the maximum for their new pay range agreed to pay reductions.

Amongst the NAO’s recommendations is that the BBC should ensure it has full central oversight and challenge of key data, including the costs and benefits of its terms and conditions reforms, to track the ongoing value for money of its staff pay-bill.

Amyas Morse, head of the NAO said:“The BBC has made some extensive reforms to its staff pay-bill and is now well ahead of other organisations with regards to pay transparency and the gender pay gap. However, these positive developments would be reinforced by a visible cycle of oversight and challenge by the Board, which we did not find to be clearly evidenced”.

* Read Managing the BBC's pay bill here

* The National Audit Office



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