How pay negotiations work in UK universities

On one level, there’s not a lot to say about the current pay dispute.

Staff deserve to be paid more, university managers need their universities to be financially viable.

The compromise will – as compromises tend to – be found somewhere in the middle of the two asks. Meanwhile the rhetoric from both sides will make this compromise look as far away as it possibly can be.

Union leaders are keen to create an impression that universities are well off. This gives hope to their members – the idea that the money is there – and offers easy attack lines on university profligacy and waste. Frequently, the bugbear is “shiny new buildings” – apparently built in preference to paying a fair wage.

University leaders, conversely, tend to give the impression that their institutions are struggling financially – and that the money simply isn’t there for pay rises. It gives the impression that unions are being unreasonable, and that pay demands are not at a level that supports the continued existence of universities.

The general and the specific

There are a couple of problems with both these analyses. The first is that there are 144 universities directly involved in this dispute, and more than 400 providers of higher education (all of which employ academics and support professionals too). Some of these providers are, by any standards, well off. Others are not.

Lumping together the operating surplus of every university and subtracting the cost of a 13.4 per cent rise in staff costs makes for a good debating tactic. It is, however, completely unimplementable if you want to secure better pay for staff.

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One key thing to note here is that in the last available year of data sixty per cent of the total sector surplus that is bandied about is found at just seven providers: Cambridge, Oxford, Edinburgh, Glasgow, Imperial, UCL, and LSE.

If you want to make this argument at a university by university level the data is out there, and I’ve knocked together a tool to help you do so. My advice would be to look at whether your university has made an operating surplus over each of the past 3 years – and whether this would cover your chosen broad pay claim – as a starting point.

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Definitions

The nuances in nature of “surplus” and “reserves” tend to be lost in the wider debate – in simple accounting terms the surplus is what remains when expenditure is subtracted from income. University reserves? Well, I can’t really improve the way BUFDG puts it – a university may have:

• Endowment reserves – donations of money or other assets, which are used to earn interest or other investment return that can then be spent on the institution’s activities, in accordance with the specific purpose for which the donations were given
• Restricted reserves – resources that have been provided to the institution for a specific purpose (such as grants for teaching and research) and can only be spent on the activities to which it relates;
• Unrestricted reserves – resources that are held by the institution but that are not tied to a specific purpose, though they are likely to be tied up in land, buildings, facilities, investments and income due, rather than held as cash;

I’ve been over the “shiny buildings” thing a few times before on Wonkhe – suffice it to say here that capital funding is not recurrent funding you could use to pay staff (staff do tend to like to be paid every year, after all), it has generally been borrowed for a defined purpose linked to the creation of a defined asset, and the days of cheap borrowing are pretty much over for most providers with the rise in interest rates. Universities do need more estates to teach and house all those extra students they need to recruit – it makes sense that this has happened recently during a period of cheaper finance rather than leaving the circa 2012 campus to moulder until now (and then have to pay much more in interest to raise funds to repair or replace).

For people who like to be paid each year, the reserves issue is a bit of a red herring. Yes, some universities with large reserves may have some cash in hand that could (and arguably should) be used to support one off payments to staff struggling with the cost-of-living crisis. But one off cash payments drawing on university reserves are not a salve for the wider problem of paying people properly for the work they do. Your surplus is a better bet for salary increases.

What are staff paid?

Even so, operating surpluses are a good thing for any business to be running – allowing, as they do, a contingency should something untoward happen (a pandemic, for instance, or a sudden drop in overseas recruitment). For example, TRAC calculations suggest a margin for sustainability and investment of around 10 per cent of expenditure is sensible… this is sometimes possible at the level of a cost centre but very rarely holds across a whole university.

And some of this investment – yes – should be in staff pay. But which staff? Another professorship or three more early career researchers in their first full time role? Or a welcome and richly deserved pay rise for the staff that are already there?

This is the best HESA data we have on academic staff salaries (no, there’s nothing on non-academic staff, and nothing on part-time staff…), you can see the way the mix of full-time contracts is distributed at your provider using the filters.

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This points us to another truth – staff are working harder, working longer hours and dealing with more students than ever before. Why? – because the unit of resource (the average funding available per student) is decreasing sharply, and providers need to grow just to meet rising costs.

To have retained the same buying power as £9,250 (a single year of undergraduate tuition fees) would have had in 2017 a university would need £11,380.23 at the end of last year. Income from the Office for Students has fallen by 17.4 per cent since 2018-19. Fees and teaching related income are a large part of the income of most providers, and with no sign of any further increase providers need to grow home student enrolment, grow international recruitment (or raise fees for international students) or some combination of the two. All of which means more pressure on staff, and on physical resources.

What’s JNCHES and why is it new?

There is a national pay bargaining system in higher education, though not all providers are party to it. National bargaining is fair because it supports equal pay for equal work, but as a consequence it constrains the overall offer to that which can be afforded by the most precarious employer and it can struggle to accommodate specific local issues.

Back before the Joint Negotiating Committee for Higher Education Staff (JNCHES) there were ten pay negotiations that affected higher education depending on what job you did and where you worked – in 1997 Dearing, in his usual tidy fashion, spotted this as a problem and recommended (recommendation 50) that the system was updated via an independent review (what became the Bett Review, which reported in 1999). Following a consultation a single national pay spine (Bett had recommended separate spines for academic and non-academic staff) and associated mechanisms were agreed for the first time.

JNCHES kicked off at the turn of the millennium. and was renewed and updated in 2006 (hence “new”, anything prior to that was “old JNCHES”) and revised again in 2011. It’s a clearly defined space where representatives from the five higher education unions (UCU, Unison, Unite, GMB, and EIS/ULA – 16 representatives in total) and the Universities and Colleges Employers Association (UCEA – 6 representatives, and UCEA also provide the secretariat) discuss pay and related issues.

The primary activity of New JNCHES is an annual negotiation on pay, via the updating of the HE pay framework agreement (sometimes called the “spine”) – the one happening now relates to the 2023-24 pay negotiations, it would usually have happened in March/April but has been brought forward because of the cost of living crisis – but there is also an annual strategic meeting (usually December) with wider representation to chat generally about the state of higher education, and the possibility of discrete working groups to address particular issues (like career development, equality and progression issues, and training opportunities).

The idea is that both sides of the debate are striving to reach a satisfactory agreement – agreeing agendas for meetings and approaches to negotiation accordingly. If it is not possible to do this there is a dispute resolution mechanism: another round of meetings to include senior officials on both sides, followed by the possibility of third party assistance (usually the Advisory, Conciliation, and Arbitration Service – ACAS). More than half of the annual pay negotiation rounds have ended in dispute in the past decade.

Here’s that spine (in cash, non-inflation compensated terms) since 2009-10.

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Is the system working as it should?

The common criticism made of pay offers specifically (leaving aside the other conditions negotiations that tend to happen separately) is that they do not meet the prevailing rate of inflation – in other words that the cost of buying stuff is increasing faster than wages, making for a real-terms pay cut.

Here is a look at the average pay increase each year for each spine point, compared to the prevailing rates of interest (CPI and CPIH) for the previous calendar year.

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A bunch of caveats here – this is calculated directly from the salary data I have been able to find, which has been rounded to the nearest pound. These increases do not reflect the actual changes in pay experienced by staff – there’s no way of adding pay increments, or movement between spine points, for instance.

The comparisons are with CPI (the standard measure of inflation) and CPIH (a modified version that includes housing costs) – RPI is a deprecated measure of inflation, and will be fully replaced by CPIH in by 2030. And I’ve stopped the series at 2022-23 because recent annual estimates of inflation are often revised, especially during periods of rapid changes to the prevailing economic climate – monthly inflation estimates recently have been, frankly, terrifying but you can’t really compare annual wage increases with monthly inflation estimates. Oh, and remember inflation is an aggregate measure – which may not accurately reflect the cost of living as experience by a given individual – especially if your spending differs sharply from the CPI or CPIH “basket”.

A glance along the graph shows that pay and inflation do not often sync up. This might make sense, because low inflation means less pressure on other university costs (energy, materials, rent) and thus more money available for pay. But it also means that when staff are hit with these same increases in living costs the envelope available for salary increases is narrower.

To raise salaries appropriately universities should ideally see an inflationary growth in their income – this does happen with some sources (uncapped fees for postgraduate courses and international students, commercial research income) but not with the main ones (fee income – unless expansion is possible with the caveats above, other government income including for research). Argue for higher salaries, and you may also be arguing for higher tuition fees.

In the absence of proper government funding for universities there are, of course, alternatives. Some providers recruit staff (especially younger staff) on contracts that differ widely from the standard full-time and part-time options, or set up an arms-length staffing agency. And some providers have opted out of the national New JNCHES process entirely – setting local salaries (often with reference to the national agreement) to address local needs and considering the local availability of funds.

A national pay deal that is unaffordable for the least financially stable providers will likely lead to more of the above, and will place further pressure on the idea of national pay scales. Indeed, UCEA is already consulting on possible alternatives to New JNCHES – considering either modifying or scrapping the system which (lest we forget) generally ends with external dispute resolution.

Any new approach would need to take into account the way staff are currently paid, and close the loopholes that make precarious employment an option. For me (and I’m no expert), it is possible to imagine something that pays heed to the prevailing cost of living – on both sides of the equation – more explicitly. New JNCHES has struggled during periods of relative economic stability – the years ahead will present many further challenges.