Why TSSA thinks market bench-marking is bad
Why TSSA thinks market bench-marking is bad
By Kerry Abel, TSSA’s Full Time Organiser for TfL
In our recent TSSA at TfL newsletter[i], we announced that TfL is embarking on the biggest shake up of their pay structures since the introduction of Pay for Performance (PfP) in 2015. This new Pay and Reward Framework will be rolled out to all staff on PfP or the Senior Manager Reward Framework (SMRF) from 1 April 2025.
TSSA has been assured that in year one no one will have their pay reduced. But we are concerned about the direction of travel and about TfL’s motivations for introducing this new structure. The Framework will introduce 25 new job families and give each job family five pay ranges, therefore introducing 125 new pay ranges where currently there are only five.
This introduces a more blatant market forces element to your pay and will make it harder to establish if staff on the same Hay score can be compared to see if they have a claim for equal pay or work of equal value. We believe that will disadvantage women, BAME[ii] and disabled staff, where TfL is already the worst offender[iii] in the GLA family for the gender, race and disability pay gaps. TfL’s pay gaps have narrowed since 2019 but not enough, and we suspect this is a result of general pay suppression rather than a genuine equalling out of pay.
We are also concerned that the direction of travel is to limit pay rises (including reflecting increases to cost of living) and progression based on skills, knowledge and experience, especially for Band 1 staff. Preferring instead to shift that money, over time, to increase pay for jobs in Bands 3 which are harder to recruit. We of course want staff to be paid well, but not at the expense of lower paid colleagues where women, BAME and disabled staff are over-represented.
We want to breakdown exactly why we think benchmarking to market salaries is a bad thing for TfL. Here are six reasons:
Benchmarking salaries to the market for public sector employees, while seemingly a straightforward approach, can have several negative consequences, particularly for organisations like Transport for London, measuring against private-sector rates poses significant risks. These include exacerbating existing discrimination in pay - especially along gender, race and disability lines; disrupting the fairness of pay structures and undermining the public service ethos that defines organisations like TfL. Public sector pay structures must reflect cost of living pressures, equity, social value, and long-term sustainability rather than short-term market fluctuations. Maintaining an internally consistent and transparent pay structure aligned with democratic values is key to mitigating these risks.
1. Risk of reinforcing bias and discrimination
Pay benchmarking, especially when linked to private-sector practices, risks embedding historical and structural discrimination into pay systems.
Private-sector pay disparities often reflect unequal access to high-paying positions or systemic biases. By aligning public sector pay with the private sector, TfL might inadvertently perpetuate these pay gaps, For example, women[iv] BAME[v] and disabled[vi] employees may be paid less in the market due to entrenched societal discrimination. Private sector pay is often influenced by market forces, supply-demand imbalances, or even gendered assumptions about certain roles (e.g., administrative positions being undervalued). By using these benchmarks, TfL might adopt pay structures that reinforce discriminatory pay practices. For instance, roles that are predominantly occupied by women, BAME or disabled staff may be undervalued, as has been seen in some private-sector comparisons, where ‘feminised’ roles such as administrative or support functions receive lower compensation.
Unlike in the public sector, where pay and benefits are typically subject to oversight and transparency, private-sector benchmarks can obscure pay disparities. Public sector organisations like TfL, have a commitment to fairness and equality and overseen by the Mayor of London, could be undermining their efforts to close discriminatory pay gaps if they base pay solely on market rates instead of internal equity and equal pay principles. A direct correlation between public sector pay and the external market rate does not necessarily account for public sector values, equality initiatives, or the specific social goals of public bodies like TfL, which have a responsibility to reflect broader public equality standards[vii].
2. Lack of internal equity
Market benchmarking tends to focus on external salary comparisons, potentially overlooking internal equality issues. Employees in similar roles within the same organisation could be paid differently simply due to differences in historical market conditions when they were hired. This creates internal wage disparity, undermining morale and fostering perceptions of unfairness among staff.
For example, TfL employees may find it difficult to reconcile unequal pay for similar roles simply because the external market has shifted or evolved. A fair pay system should account for internal consistency, ensuring employees with similar responsibilities and experience receive similar compensation, rather than being driven by external market forces that is not comparable.
3. Pay systems become overly complex
When salaries are continuously adjusted to match the fluctuating market, pay systems can become increasingly complex and difficult to manage. This is certainly the case at TfL, where the pay ranges will go from 5 to 125! In order to keep up, TfL would need to constantly analyse the external market, which requires considerable resources and time. Furthermore, variations in market pay structures (e.g., differences in salaries between sectors or regions) could lead to administrative burdens, potentially creating confusion and dissatisfaction among staff. TfL admits it does not disaggregate London salaries, instead takes a percentage average increase for London, meaning the higher paid get a disproportionate uplift when London Weighting is intended to flatten out cost of living for lower paid.
4. Lack of progression based on knowledge, skills and responsibility
Linking salaries directly to market rates can distort the pay structure within an organisation. This approach may lead to a lack of clear progression or reward for long-term commitment and increased skills. If employees are paid according to market trends, they may feel incentivised to move between employers frequently for better pay rather than staying with an organisation that prioritises other factors, like social impact or job stability. We know that happens at TfL.
5. Disproportionate focus on higher pay bands
Benchmarking may have a disproportionate effect on executive pay within TfL, as the higher end of the pay scale is more likely to be influenced by market-driven factors.
TfL, like many public-sector bodies, faces challenges attracting staff in tech and data or engineering for example, these jobs are skewed at Band 3 and above. Market-based salary benchmarking can result in inflated salaries at these top levels, potentially resulting in resentment from frontline staff who may feel their work is undervalued in comparison. Public sector organisations are expected to control executive pay in a way that reflects their commitment to service and value for money as well as ensuring that taxpayer money is spent efficiently. Excessive alignment with the private sector may harm public perception and lead to accusations of waste or unfair treatment.
6. Undermines collective bargaining and the voice of union members
In the public sector, unions play a significant role in negotiating pay and conditions. Market benchmarking erodes the effectiveness of collective bargaining, as unions have less leverage to negotiate pay based on the public sector’s specific needs (such as long-term career development, stable employment, and pension security) rather than external market forces that might not reflect TfL’s workforce. This is important because trade unions represent your voice and act on your behalf.
What should TfL do instead?
Other public sector organisations like the NHS have a pay and reward framework[viii] designed to reflect public sector values, such as fairness, equal opportunity with renumeration based on cost of living pressures, skills, responsibilities, knowledge and unsocial hours for shift payments. There can even be market supplements added that reflect the hiring environment but are separated from basic pay and transparent. These frameworks are typically more structured and transparent than in the private sector.
[i] TSSA at TfL newsletter 26/11/24 https://mailchi.mp/tssa/tfl-rewardframework-26nov2024
[ii] Language note for BAME https://www.lawsociety.org.uk/topics/ethnic-minority-lawyers/a-guide-to-race-and-ethnicity-terminology-and-language#:~:text=Both%20'BAME'%20(Black%2C,and%20in%20company%20diversity%20monitoring
[iii]TfL has the worst gender pay gap of all of City Hall’s agencies https://www.cityam.com/tfl-has-worst-gender-pay-gap-all-city-halls-agencies-new/
[iv] Ciphr's gender pay gap survey 2024: results https://www.datawrapper.de/_/bNJsw/
[v] Ethnicity Pay Gaps in the UK Public Sector https://assets.publishing.service.gov.uk/media/64c24130827388000d5a3f1b/Understanding_Ethnicity_Pay_Gaps_in_the_UK_Public_Sector.pdf
[vi] The disability pay gap in the UK: What is the role of the public sector? https://doi.org/10.1016/j.labeco.2024.102642
[vii] TfL Equality Objectives https://content.tfl.gov.uk/our-equality-objectives-november-2021.pdf
[viii] NHS pay and reward framework ‘Agenda for Change’ https://app.croneri.co.uk/topics/agenda-change/indepth