Senior pay in higher education has rigorous oversight and transparency
The job of setting appropriate pay for senior staff in higher education falls to each institution’s Remuneration Committee, as is standard across public and third sector organisations and listed private sector companies.
A Remuneration Committee is made up of independent governors. Their task is to agree appropriate remuneration for senior staff, at a level that supports the recruitment and retention of high performing leaders, while exercising due constraint in the use of institutional resources. In doing this, they consider a range of evidence, including performance measures, the value they add to their institution and comparative data on pay within and beyond the sector.
Each Remuneration Committee is responsible to the institution’s governing body (usually known as the Court or Board), which always includes students and staff members. The Scottish Code of Good HE Governance requires that the governing body sets the policies and process that the Remuneration Committee should follow and that the committee must report back to the governing body.
The university’s Principal can be a member of the remuneration committee and can advise on the performance of other senior staff, but the Principal is never present in discussions of his or her own pay.
In 2014/15 the total increase in Scottish Principals’ pay amounted to 3.4%. This includes all benefits received by Principals but does not include pensions contributions. This figure does not include data from institutions where a new Principal started his/her tole during the relevant period as this does not give a like-for-like comparison. Including these institutions could inadvertently lower the sector’s figure as those new to post are likely to start at a lower level of remuneration than their predecessor.
Transparency over pay
All higher education institutions publish the details of senior remuneration on an annual basis. Every institution reports on the number of staff paid in the higher salary brackets. The Principal’s emoluments are listed separately.
Annual financial statements are publicly available on institutional websites.
Scotland’s universities have been disclosing details of Principals’ pay and salary details for senior staff since the late 1990s. This is consistent with the Scottish Funding Council’s Accounts Direction and this practice pre-dates Freedom of Information (Scotland) Act of 2002.
Principals’ pay in the UK is subject to a high level of transparency. The Times Higher Magazine publishes a record of all Vice Chancellors’ remuneration on an annual basis.
University staff on NHS contracts are among the highest paid in our university sector. Institutions with medical schools will typically have a higher percentage of staff listed in their higher salary bands over £100,000. It is very important that universities and the NHS have close working relationships, often sharing staff, for the training of new doctors and in the pursuit of breakthroughs in medical research.
Principals' pay in context
University Principals lead large and complex institutions. The decisions they take affect the fortunes of institutions that in many cases employ thousands of people and collectively contribute over £7 billion to the Scottish economy. Less than half of the sector’s funding comes from core public funding, meaning that Principals and their senior teams must act entrepreneurially to ensure that their institutions raise significant revenue, while nurturing their key missions of teaching, research and knowledge exchange. Scotland’s higher education institutions do so successfully in an intensely competitive international context.
By all available measures, the remuneration of university Principals is commensurate with this level of responsibility. For example, it is very closely comparable to that of the heads of other large charities (source: Third Sector). At the same time, Principals’ pay remains far below the remuneration packages of chief executives of FTSE 100 companies, whose median earnings are 16 times higher (source for FTSE 100 figure: pwc).
The average pay of Scotland’s Principals is consistently slightly lower than that of other Vice-Chancellors across the UK, despite the leading performance of the Scottish higher education sector by many key measures. None of the 20 highest earning UK Vice-Chancellors work in Scotland.
Internationally, heads of comparable higher education institutions can receive much higher remuneration packages. For example, compared to Scotland, the median head of institution’s earnings are 56 per cent higher in South Africa and 47 per cent higher in Australia (Source: UCEA; 2014 figures).
Senior pay and other staff pay
Each higher education institution is an autonomous employer. However, staff pay in UK higher education is determined through national bargaining, involving the employers’ organisation UCEA and the sector’s trade unions.
Each year, around 43 percent of HE staff receive incremental pay progression and/or performance-related pay increases over and above any nationally negotiated increase. Taking this into account, the average increase in staff pay between 2013/14 and 2014/15 is an estimated 3.3 per cent not including pensions contributions and any other benefits (Source: UCEA).
National pay bargaining is entirely separate from the work of institutions’ remuneration committees. Nonetheless the ratio of head of institutions’ pay to staff pay has remained stable in the last decade at between 6:1 and 6:4 at the median point (Source: UCEA). For comparison, this ratio is lower than the equivalent for NHS Trusts at 7:1 (source: e-reward) and far below common pay ratios in the private sector. As an example, a 2011 report by Hay Group found the ration between the average CEO and average employee in a FTSE 350 company ranged from 9:1 in the oil and gas sector up to 43:1 in retail.