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POL00460663
Overview of HMG Governance
POL, as a public corporation, is exempt from a number of rules applicable to the public sector
generally, for example Cabinet Office spend controls. However, HM Treasury looks to control
and influence pay across the entire public sector to safeguard public money and ensure that
senior pay is proportionate and justifiable. The degree of control varies across organisations
and as a commercially oriented public corporation, POL has stronger arguments that most
public sector bodies to argue that certain rules are not appropriate and should not apply.
However, as a 100% government-owned entity, POL should not expect complete freedom
over pay decisions.
Therefore, HMG can require POL to comply with certain public sector wide directives such as
the public sector pay freeze last year which unusually applied to public corporations like POL.
Moreover, even where Shareholder approval is not formally required under the Articles of
Association and the Shareholder Framework Document, Remco should use its judgement
and consult BEIS, particularly on matters that are likely to be sensitive for HMG
Managing Public Money: application to POL
1. As a public corporation, the PAO has designated the POL CEO as POL’s Accounting
Officer (AO) and expects the AO to observe the principles set out by HM Treasury in
Managing Public Money (“MPM”). POL’s AO is personally responsible for
safeguarding all funds for which he or she has charge; for ensuring propriety,
regularity, value for money and feasibility in the handling of those funds; and for the
day-to-day operations and management of POL. The AO should ensure that POL is
run on the basis of the standards of governance, decision-making and financial
management set out in MPM, as well as ensuring that POL uses internal and external
audit to improve its internal controls and performance._
2. In addition to the responsibilities of the AO, the responsibilities of POL’s Board will
include ensuring that any statutory or administrative requirements for the use of
public funds are complied with, and have regard to the relevant principles set out in
the Government Code of Good Practice for Corporate Governance and in MPM, as
well as the requirements under the Articles to seek consent for certain matters.
Ministerial appointments
3. The Post Office Shareholder is the Secretary of State for BEIS. The Articles of
Association require the Shareholder to approve the remuneration, terms and
conditions of ministerial appointments. This covers the CEO, CFO, Chair and Non-
Executive Directors. All aspects of pay and terms and conditions are subject to
approval including contractual terms, salary and salary increases, benefits, pension
arrangements, performance related pay (STIP and LTIP) and termination payments
need to be approved. This includes Shareholder “approval of or agreement to or any
material variation or amendment to the remuneration (including, without limitation,
salary, share options, bonuses, benefits in kind and pension rights) paid or granted to
any director of the company.”
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4. Moreover, the Chief Secretary to the Treasury (CST) must approve the remuneration
arrangements for appointments to Public Corporations where performance related
pay arrangements exceed the threshold of £17,500 and the appointment is a
Ministerial appointment. The POL CEO and CFO are Ministerial Appointments.
5. These approvals are also reflected in the Remco Terms of Reference which states
that Executive Director LTIP and STIP arrangements must be approved by the
Shareholder and POL’s Shareholder Framework document which states that “The
Remuneration Committee shall recommend to the POL Board the remuneration
policy and any changes to individual elements of the remuneration packages for
members of POL’s Board. As per the Articles, the remuneration of all Board members
will require approval by the Shareholder. Remuneration of Board members that
exceeds the threshold set in HM Treasury’s Guidance for Approval of Senior Pay
requires additional approval by the Chief Secretary to the Treasury.”
6. The process within BEIS for Shareholder approval is for proposals to go through a
Senior Civil Servant (SCS) Panel, then Permanent Secretary approval, Minister of
State approval, and if necessary, SoS approval. In some instances, the SoS may
delegate approvals to Junior Ministers.
7. As per HMT Senior Pay Guidance for Public Corporations, approval by the Chief
Secretary to the Treasury (CST) is also required where Board member pay (pro rated
as necessary) exceeds £150k or bonuses exceed £17,500. In some instances, the CST
may delegate approvals to HMT Officials.
8. The need for approval applies to all material changes in pay arrangements including
any changes which would increase pay above the agreed limits or even where pay
stays within agreed limits, where the structure and metrics of the award differs
materially from previously approved schemes. Where judgments of materiality are
unclear, UKGI Officials should be consulted who will in turn consult with colleagues at
BEIS and HMT for a definite judgment.
9. Proposals should set out the maximum potential award, the structure of the award
and the metrics for Ministerial approval.
10. The proposal should highlight where metrics are not yet final, outline the scope for
change, and seek approval to delegate further approval of the metrics for RemCo to
agree with UKGI.
11. Where possible, metrics should be agreed at the start of the relevant period, and
metrics should not be changed at the end of the period because this does not
support effective performance management.
12. RemCo should be given sufficient advance notice of proposals to conduct effective
scrutiny and come to a reasoned decision.
Other staff
13. Historically, POL has had pay freedom in relation to other staff. However, any
remuneration package in excess of the CEO’s will require CST approval irrespective of
14,
15.
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whether the position is a ministerial appointment. Additionally, HM Treasury has
now made it clear that they expect all public sector bodies to comply with Public
Sector Pay guidance. This is now also reflected in Appendix 5 of POL’s Shareholder
Framework document which stipulates that POL has agreed to comply with public
sector pay and terms guidance. The Public Sector Pay guidance should be read in full.
The practical consequences of the guidance are as follows:
The government expects every part of the public sector to demonstrate that it is
using public money efficiently and responsibly and to ensure that pay and terms are
always proportionate, justifiable and deliver value for money for taxpayers
Payment in lieu of pension (PILOP): Strictly not to be offered to employees at any
level of the organisation.
Private medical insurance (PMI): Strictly not to be offered to employees at any level
of the organisation. HMT understand that it is problematic to unwind this for current
employees, and that a pragmatic solution is not to offer PMI for new joiners.
Health screening: We have clarified that this should not be paid to the individual as
a cash allowance and we confirmed that the provision of free health screening is
undertaken by other government departments and paid for out of a centralised
budget by the organisation. Although it forms part of the individuals total reward
package, it isn’t payable directly to them.
Car allowance: Under the public sector pay and terms guidance, there is no explicit
prohibition of the use of car allowances, however historic cases have demonstrated
that the car allowances should only be used where it is in integral part of the
individual’s role to have the use of a vehicle and that any allowance paid in respect
of this needs to be limited to the payment towards that vehicle. The main point to
note here is that the individual is not given a car allowance as cash with freedom as
to how it is used and that the individual would receive financial gain from that
allowance outside the use of a vehicle.
Life Insurance: This is equivalent to the Death in Service Benefit that Civil Servants
receive through the Civil Service Compensation Scheme and we would not consider
this to be novel, contentious or repercussive in its own right. We would not consider
an amount offered of 6x salary as out of step with other public sector organisations.
Again however, this should not be payable as a cash allowance to the individual as is
usually administered by the organisation but part of the total reward package.
Group Income Protection Insurance: Same rules apply as above re not paying as a
cash allowance. We see this as the equivalent of Ill Health Retirement under the
CSCS where an individual will be compensated if they become too ill to continue
working. It is not novel, contentious or repercussive in this respect. It does depend
however on how generous the offer is on whether this view may be swayed.
Further to this, the CST will reject remuneration for ministerial appointments that
includes cash allowances and pay in lieu of pension.
Civil Service Pay Guidance
16.
The Public Sector Pay guidance is distinct from the Civil Service Pay Guidance, which
applies to a more limited set of public sector bodies, and not the Post Office. It
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continues to be the case that the Civil Service Pay guidance (which applies Cabinet
Office spend controls and caps pay growth for the whole organisation) does not
apply to POL. This is confirmed in Appendix 5 of the Framework Document which
states that ‘POL and UKGI have agreed that the Civil Service Pay guidance (which
caps pay growth for the whole organisation) does not apply to POL.’