HMRC’s chief digital officer Mark Dearnley has confirmed that the company set up to employ private IT contractors moving over from the soon-to-end Apsire contract will still be bound by the Treasury’s 1% cap on public sector pay rises.

HMRC wants to hold onto private sector expertise as it extricates itself from Aspire contract – Photo credit: PA

HMRC signed its ten-year Aspire deal with supplier Capgemini in 2004, at a time when long-term contracts with a single supplier were common practice across government. However, the Cabinet Office has since stressed the need for departments to end their reliance on such deals in favour of shorter, more targeted contracts with a wider range of suppliers, and HMRC last year brought chunks of the deal to an early end.

To try and ensure a smooth transition from the contract, HMRC has set up a new government-owned company – called Revenue and Customs Digital Technology Service – to directly employ private sector contractors who had been working for Capgemini.

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But the Public and Commercial Services Union has questioned the ability of RCDTS to convince contractors with highly-marketable skills to make the transition to the civil service, amid the ongoing Treasury policy of limiting all annual payrises across the public sector to 1% until at least 2020.

“Although RCDTS management claim to have control over salaries, they are also bound by government pay restrictions, unlike the private sector,” PCS warned in evidence to MPs on the Public Accounts Committee.

The union added: “Given the context of a 1% public sector pay cap, it is unlikely that RCDTS will be able to fix the glaring pay anomalies they have inherited in the transfer from the private sector, let alone satisfy technical staff’s long-term salary ambitions, as IT salaries in the private sector are beginning to grow.”

Dearnley told the PAC this week that the new company had been set up specifically to provide “a better employment offer for the staff coming in from the private sector”, including better base pay and pensions than could be expected as direct employees of HMRC.

But he confirmed that, while RCDTS will be given enhanced starting salaries, payrises will continued to be limited by wider pay restraint.

“It is limited by the pay cap,” Dearnley told the committee. “But it does have a different salary scale and remuneration structure, so in that, we’ve been able to put together what we believe is a much more appropriate offer for people coming in from the private sector.”

Richard Bacon, the Conservative MP who led the PAC’s questioning on the Aspire deal at this week’s hearing, asked Dearnley whether the 1% cap meant the new company could end up in a position where “even if the starting salary is okay, it soon wouldn’t be”.

Dearnley said HMRC had “tried to set the salary ranges taking that into account”, but he added: “I’m sure this will be an ongoing topic of conversation with the Treasury over the next few years.”

The HMRC IT chief was also questioned on PCS’s claim that many staff, including managers, who were initially marked for transfer into the new company had “removed themselves from scope”, something the union said was “unsurprising” given the terms and conditions offered by RCDTS.

“We expect the drain of staff to continue from within RCDTS unless HMRC seriously addresses the problems of trying to recruit and retain skilled staff,” PCS warned.

Dearnley admitted that more than a quarter of the private contractors eligible for transfer into the civil service had chosen not to do so. But he argued that this was normal practice in the tech industry during a period of transition.

“We ended up with about 27% of the people – about 30 or 40 people – who chose not to come across,” he said.

Dearnley added: “This was them making a personal choice that they either wanted a career somewhere else or they found a different job with a current employer, or it was their moment to retire or go off to do something different. That level of attrition that we saw was actually lower than we expected – but in line with the industry standard.”

According to PCS, a further 300 staff working for Capgemini and Fujitsu are currently in line to become employees of the new government-owned company, with an expected transfer date of October 1.

HMRC’s move to set up RCDTS comes as the Cabinet Office considers wider moves to draw up a separate pay and grading structure for digital, data and technology specialists in the civil service.

Government Digital Service executive director Stephen Foreshew-Cain told PublicTechnology‘s sister publication Civil Service World last month that it was “time to question the foundational principles” of Whitehall’s grading system and said government needed to ask “what do we do to attract, to retain and to develop” IT and digital staff.

A recent survey of Whitehall’s digital leaders, carried out by the National Audit Office spending watchdog, highlighted the scale of the challenge as the civil service looks to recruit and then hold on to staff with specialist skills in a competitive market.

More than four-fifths of respondents to the NAO’s study said the amount they were able to pay staff had had a negative impact on their organisation’s ability to “recruit and retain the right people from elsewhere”, while the majority of respondents said they felt civil service recruitment processes had had a negative impact on recruitment of tech specialists.