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Market supplement policy

How we establish the business need for applying market supplements.


Policy statement

1) There may be exceptional circumstances explicitly due to labour market conditions where the HERA evaluated grade results in an inability to successfully recruit or retain suitable staff for specific jobs. In these exceptional circumstances, it may be appropriate for consideration to be given to the payment of a market supplement to overcome this problem.


2) The University is committed to the principles of equal pay for work of equal value and by using the HERA job evaluation process this ensures a consistently applied and robust approach which measures the relative value of jobs within the University. This in turn determines the grade and position on the University’s pay structure.

3) This policy has been developed to ensure the University has a clearly defined approach to applying market supplements where a genuine business need arises and follows the guidance set out in Appendix E of the National Framework Agreement Guidance for Use of Attraction and Retention Premia. It also complies with the legal requirement that employers have objective justification if they offer different rates of pay to staff whose work is of equal value.

4) Rigorous procedures have been put in place to explore whether existing methods of recruitment and retention may be at the route of the problem before consideration is given to reviewing the pay.

Definition and purpose of market supplements

5) A market supplement is an additional temporary payment to the basic salary of an individual job or specific group of jobs where market pressures would otherwise prevent the University from being able to recruit or retain staff with a particular skill or group of skills. Market forces can fluctuate and market rates of pay may go down as well as up.

Types of market supplements

6) A Recruitment Supplement is a temporary payment made to an individual to ensure their recruitment by enhancing the salary being offered, bringing their total reward package up to the market rate. These payments will be subject to regular review.

7) A Retention Supplement is a temporary payment made to an existing employee over and above their basic salary in order to retain their services, bringing their total reward package up to the market rate. These payments will be subject to regular review.

8) The value of the supplement will be determined by the difference between the top point of normal progression in the grade for the job as determined by job evaluation, and the market rate for the job in question. The payment will not exceed 20% of the maximum point on the grade. When reviewing competitor pay rates the total reward package will be taken into consideration as the benefit/total reward package being offered elsewhere may not be as generous as the one being offered by the University.

Definition of business need

9) Job analysis does not take account of labour market trends and there may be a need to attract or retain high calibre staff who are recognised for their expertise or specialism within their particular field who can help drive the University forward.

10) There may be a skills shortage affecting a single job or a group of identical jobs which makes it difficult to recruit or retain staff in a specific area of work.

11) The job holder may be required to have specialist skills or knowledge of a particular type that similar existing job holders do not possess.

Scope and principles

12) This policy applies to all staff in Grades 2 to 9.

13) The intention to pay a market supplement should not be discussed with recipients until the proper authorisations have been obtained on the appropriate forms attached to the Procedure for Determining and Awarding Market Supplements.

14) A business case must be made for each market supplement and it must be demonstrated that any skills being rewarded through the application of a market supplement are essential to the job.

15) Recruitment and retention supplements will only be paid where there is clear business need and normal methods of recruiting and retaining staff have been exhausted.

16) Market supplements are not intended to be a substitute for the policy that deals with the incremental position on appointment or the University’s normal recruitment and selection process.

17) Market supplements will only be paid in exceptional circumstances, once alternative options have been considered and where market forces indicate pay and benefits being offered significantly exceed that being offered by the University as determined by the HR Business Partner (Reward).

18) Payment of a recruitment supplement will not result automatically in a payment of a retention supplement for staff in identical jobs. Likewise, a retention supplement will not result automatically in a payment of a recruitment supplement for staff in identical jobs. Evidence for both cases will be different and must be submitted in line with the procedures. The Director of HR will make the final decision. However, it should be remembered that market supplements apply to jobs and not individuals and consideration should be given to the number of staff who are in jobs to which the supplement might apply (i.e. would the benefits of paying a supplement outweigh the disruption/continuity, recruitment costs or morale?).

19) Robust processes will be followed for determining the appropriateness of applying recruitment and retention supplements, including sources of qualitative market data to support the business case. The appropriate external market will be determined by the Line Manager, HR Business Partner and HR Business Partner (Reward).

20) The rationale for the payment of a supplement must be recorded by the HR Business Partner (Reward). Letters of appointment and variation letters will confirm the criteria for the market supplement element in detail as explained in the 'Review and criteria for payments' section.

21) In order to comply with Equal Pay legislation, the University will ensure that the process of objective justification is followed in each case. In addition, HR will periodically carry out an equal pay audit of all salaries in the University.

Decision making

22) If the Head of the Academic/Professional Services Department/Line Manager believes they have a recruitment or retention problem they should discuss this with their HR Manager.

23) The HR Manager will provide advice on the most appropriate action to take, giving consideration to the reasons for the problems.

24) If a clear business case for a market supplement is identified after following the procedures, the HR Business Partner (Reward) will source the appropriate market data.

25) All the evidence will in turn be submitted to the Director of HR who will make the final decision.

26) The trade union representatives will be informed about the requirement for a supplement via a six monthly report.

27) The VCG will be notified of any agreed market supplement payments via a six monthly report.

Review and criteria for payments

28) All market supplements will be subject to review every 24 months on a rolling basis, or earlier if pay awards or market trends close the pay gap significantly, by Human Resources. The Trade Union representatives will be informed that the review is taking place.

29) Where the outcome of the review indicates the market conditions have changed and this results in a decrease in an individual’s total reward package, a notice period of three months from the review date will be given of the University’s intention to reduce or withdraw the supplement. Reduction or withdrawal may be staged over a period of up to a further nine months.

30) Where the results of the review indicate an increase in the supplement, this will be effective during the month following the review.

31) Payments will cease if the employee is subsequently promoted to a job that does not attract a market supplement or if the job is re-graded through the job evaluation process.

32) The market supplement payment will be subject to the following criteria:

  • will not be subject to increases under any pay awards
  • will be subject to the normal statutory deductions
  • will be pensionable
  • will be included in calculations for the purposes of other payments such as maternity or adoption, paternity and sick pay
  • will be paid pro rata for part-time staff

33) A market supplement is a temporary payment, subject to regular review and will not be incorporated into their basic salary at any time.

34) There is no right of appeal by the individual against a decision to remove or reduce a market supplement. However, a summary of the market intelligence will be shared with the individual to show how the review was conducted, the sources of information that were used during the review which contributed to the decision making of the HR Business Partner (Reward) or Director of HR, and also how this decision impacts the individual’s pay.

Document control

Owner: Human Resources
Approval date: July 2009

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