Select Committee on Defence Appendices to the Minutes of Evidence


Memorandum from The Armed Forces' Pay Review Body (September 2000)


  1.  The Armed Forces' Pay Review Body (AFPRB) was established in 1971 to provide independent advice to the Prime Minister and the Secretary of State for Defence on remuneration and charges for members of the Naval, Military and Air Forces of the Crown. Our remit covers Service personnel up to and including the rank of Brigadier (one Star) and equivalent. Our full terms of reference and current membership are at Annex A.[1]

  2.  Our terms of reference require us, inter alia, to have regard to the need to recruit, retain and motivate the required Service personnel and the need for the pay of the Armed Forces to be broadly comparable with pay levels in civilian life. In delivering our terms of reference we have particular regard also to wider contextual issues such as the demands placed upon Service personnel and the resulting impact on their quality of life.

  3.  The following information is provided to the Defence Committee in support of its inquiry into Armed Forces personnel issues. It reflects our deliberations and conclusions as set out in recent annual reports.


  4.  Our recommendations are based on evidence from a number of sources. We receive written and oral evidence on a range of issues from the Ministry of Defence (MoD) and from the individual Services. We undertake an extensive visits programme in the UK and abroad to meet serving men and women and their spouses, to hear at first hand their views on pay and related issues and to see their living and working conditions. In the course of this year's visits our discussion groups covered around 3,000 personnel (in approximately 200 groups) at all ranks. Finally, we commission independent research into a range of issues including pay comparability, pensions and accommodation.


  5.  Data provided through MoD for our 2000 report[2] indicated that recruitment levels have improved in recent years but that significant variations remain between Other Ranks and Officers and between the three Services. We were told also that there had been a net outflow of some 3,000 trained personnel in the year to April 1999. This provided an indication of the retention problem. As we stated in our 2000 report, the loss of trained, experienced personnel in whom significant investment has been made, had serious implications for the maintenance of operational capability. We considered that the most important single issue then affecting retention was overstretch. This concern significantly influenced our recommendations to increase the Longer Separated Service Allowance (LSSA) and Longer Service at Sea Bonus (LSSB). We expressed the view that, while pay must play its part in the recruitment and retention process, there were many non-pay issues, particularly those affecting quality of life, which also had an important bearing.

  6.  In our recent reports we have commented on a number of these non-pay issues. Overstretch has led to more frequent operational deployments which have impacted on the ability to take leave and the time available for training and preparing for promotion. Although operational commitments appear to have peaked, we have learned on our visits that they continue at a high level. In our discussions with personnel and spouses we are often told that quality of life has been adversely affected by time spent away from families and the impact of Service Life on family members particularly spouses' careers and children's education. Our visits programme this year highlighted single personnel's perception that they were also affected by quality of life factors. Personnel also highlighted quality of life issues such as: increased workloads; excessive working hours; poor career and promotion prospects; and below-standard accommodation. The above factors impact on retention and raise expectations that increased pay should compensate for reduced quality of life. Servicemen and women need to be adequately and fairly remunerated but any remuneration strategy will be undermined if they and their families are seriously discontented with their quality of life.

  7.  The Strategic Defence Review (July 1998) attached importance to improvements on "people issues" many of which have yet to be delivered. Further delays in implementing these and other major changes, such as Pay 2000, may have affected retention of personnel. We consider that it is essential for MoD to address these non-pay issues as a matter of urgency.


  8.  Under our terms of reference we seek to make recommendations that maintain broad comparability with pay levels in civilian life. Most Service posts do not have a direct civilian equivalent. We therefore base our analysis of comparability on job weight. This process involves judgement and is neither simple nor mechanistic. Each year MoD provides us with the results of job evaluation it has carried out using a propriety job evaluation system developed by external consultants. These results, covering representative jobs at each rank, enable us to compare the remuneration of Service personnel with that of civilians held on our comprehensive pay database. A more detailed explanation of the process of pay comparison, including the steps we have taken to quality assure the process, is at Annex B.[3] The pay comparability data led us to recommend differential, and higher, pay awards for Privates, Lance Corporals, Lieutenants and Captains (and their equivalents) in our 2000 report.

  9.  As part of the process of applying broad pay comparability, we take account of deferred pay represented by pension provision although we do not recommend on the scheme itself. The Armed Forces Pension Scheme (AFPS) provides for early and fast accrual of benefits compared with those in the civilian sector. We therefore apply abatement to comparator salaries (currently set at 7%). We review comparative pension benefits every five years and will next report on them in 2001. Service personnel have commented to us during our visits that pensions considerations are increasingly becoming an issue.

  10.  We adjust the military salary to recognise, in our judgement, the relative disadvantage of conditions of service experienced by the Armed Forces compared to those in the civilian sector—known as the X-factor. In our last report we considered that there had been a change in the relative disadvantage and recommended an increase of 1% bringing the level of the X-factor to 13%.

  11.  Where market forces significantly outstrip pay in the Armed Forces for specific groups, such as in the telecommunications industry, we have agreed to proposals from MoD for targeted payments (either through additional pay or financial retention incentives) to aid retention. We have reservations, however, about the use of various forms of bonus payments over the longer term because of their arbitrary nature.


  12.  Our approach to accommodation and other charges also aims to ensure that the charges levied are broadly similar to those paid by comparable civilian households. We apply an abatement to accommodation charges to reflect lack of choice and restrictions on the Armed Forces. Whilst we have acknowledged the rising cost of civilian accommodation we have been reluctant to match these increases until the promised improvements to Service accommodation are implemented. Our concerns about accommodation standards have been reflected in our recommendations on charges. For example, we have not recommended an increase to the charges for the lowest grade of single living accommodation in our last three reports. We have commented that improvements to accommodation standards clearly aid morale and retention and directly affect the quality of life of Service personnel. During discussion groups this year continued dissatisfaction with accommodation standards remained a significant issue for Service personnel and was directly linked with retention. We are reviewing the basis for accommodation charges as part of the forthcoming pay round.


  13.  We report separately each year on recommendations for the Defence Medical Services (DMS). In recent years we have made recommendations which have sought to reflect NHS pay developments and to address manpower and morale problems in the DMS. Evidence submitted for our 2000 report indicated that these had had limited impact, particularly on retention. We commented that morale was low and that there was uncertainty about the future of the DMS. We expressed doubt in our report that current and future demands placed on the DMS could be met without the introduction of further measures related to Service organisation and to the improvement of retention rates.

PAY 2000

  14.  Since 1995, MoD has kept us up to date with developments on a new pay structure for the Armed Forces arising from the Independent Review conducted by Sir Michael Bett.[4] We are informed that the new structure (now scheduled for introduction in April 2001) will introduce incremental pay for Other Ranks (and Brigadiers) and align pay more closely with measured job weight. The delay in introducing the new pay arrangements has allowed further improvements in the job evaluation process, a review of the relationship between rank and job weight, and a review of additional pay, bonuses and incentives. We will be assessing further evidence from MoD on developments under Pay 2000 in the coming months and making recommendations on pay levels for the new structure in our 2001 report.


  15.  We completed our 2000 visit programme at the end of July and will shortly begin considering written and oral evidence for the forthcoming pay round. We will submit or report to the Prime Minister and to the Secretary of State for Defence before the end of January 2001.

1   p 235. Back

2   Armed Forces' Pay Review Body, Twenty-Ninth Report 2000, Cm 4565, The Stationery Office, February 2000. Back

3   p 235. Back

4   Independent Review of the Armed Forces' Manpower, Career and Remuneration Structures-Managing People in Tomorrow's Armed Forces. HMSO 1995. Back

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