With universities desperate to preserve their funding in the post-election spending review, stories of big rises in the pay packets of vice-chancellors are surely to be avoided.
So did institutions heed the warnings that Vince Cable, the business secretary, made in February last year about the “substantial upward drift of salaries” among vice-chancellors? Have the sector’s leaders eliminated that potential weak spot by setting an example?
This year’s Times Higher Education survey of pay – the most comprehensive round-up of executive compensation in the sector – suggests that this angle of attack might still be potent, with many university heads pocketing some substantial pay rises last year.
Overall, the average package of salary and benefits for a university vice-chancellor rose by £8,397 to £240,794 in 2013-14, a 3.6 per cent rise. In the same period, rank-and-file staff were awarded a national increase of 1 per cent.
When employers’ pension contributions are included, the average remuneration for a university leader was £263,566 – some £8,443 higher than in the previous year, according to the survey, which is undertaken annually for THE by the accountancy firm Grant Thornton.
The overall 3.3 per cent increase in total benefits is identical to last year’s rise, which attracted criticism from ministers, union members and the media alike.
But about one-quarter of institutions froze or lowered the remuneration awarded to their heads in 2013-14 – a year beset by walkouts and work-to-rule protests over the “miserly” 1 per cent pay offer.
The Universities and Colleges Employers Association contends that the average increase in pay received by staff was actually 2.4 per cent – once incremental and merit rises, worth 4 per cent for the 43 per cent of staff eligible for them, are included.
Staff pay rises will average 3.4 per cent in 2014-15 thanks to this year’s 2 per cent pay rise, Ucea adds.
Nicola Dandridge, the chief executive of Universities UK, says that “the average percentage increase in the basic salary for vice-chancellors is close to the average pay increase received by higher education staff during the same period”.
However, several university heads – particularly those in their final year of office – did far better than others in 2013-14 as they were granted a range of generous bonuses and one-off payments.
Neil Gorman, who retired as vice-chancellor of Nottingham Trent University in July after 11 years in charge, was the biggest beneficiary of one-off bonuses.
His salary jumped from £321,000 in 2012-13 to £577,000 last year – an 80 per cent increase – thanks to an incentive scheme set up in 2008 with the aim of retaining Gorman’s services for the following five years.
With employer’s contributions towards Gorman’s pension worth £46,000 included, his overall benefits rose to £623,000, of which about £250,000 came from the incentive scheme.
Nottingham Trent says that it agreed the scheme after taking “independent external advice” about how to retain Gorman, who used to work in pet food research, “at a critical time in the university’s strategic development that required continuity of leadership”.
Malcolm Gillies, who retired as vice-chancellor of London Metropolitan University in July, was the second biggest earner in 2013-14 thanks to a £159,000 payment on his retirement, which boosted his overall pay package to £453,000.
The one-off payment was awarded “in lieu of notice” after Gillies agreed to step down four months early to allow his successor, John Raftery, to take office at the start of the new academic year.
Sir Keith O’Nions, president and rector of Imperial College London, collected a one-off payment of £50,000 that boosted his overall pay package to £389,000 in 2013-14. This was “in recognition of his contribution” to Imperial College, a college spokeswoman says.
Of university leaders still in post, Dame Julia Goodfellow, vice-chancellor of the University of Kent, who will become the next president of Universities UK in August, picked up one of the larger increases, with her total package expanding almost 20 per cent to £265,000. Her remuneration “remains below the average for higher education institutions of a comparable size”, says a spokesman for Kent.
That hefty rise leaves her total benefits well short of those received by recent UUK presidents, such as the University of Surrey’s Sir Christopher Snowden (£392,000), the University of Bristol’s Sir Eric Thomas (£321,000) and the University of Exeter’s Sir Steve Smith (£400,000).
Smith’s remuneration rose by 20 per cent in 2013-14 after he accepted a £58,000 performance-related bonus that he had declined to take in 2012-13.
His pay was “commensurate” with the task of leading a “highly successful institution with a turnover of £304.5 million”, an Exeter spokeswoman says.
Other high-profile university leaders benefiting from substantial increases include Paul Curran, vice-chancellor of City University London.
Curran also chairs Ucea, the body that initially offered a 0.5 per cent pay rise to university staff in 2013, and when presenting that he noted “ongoing financial pressures and uncertainty across the sector”.
In 2013-14, his own overall pay package swelled by 14.2 per cent to £346,000 – a rise of £43,000.
While his salary remained constant at £280,000, Curran took a £20,000 performance-related bonus that he had opted not to receive the previous year. He also rejoined the Universities Superannuation Scheme last year, which took employer contributions to £45,000, City says.
There are suspicions that it is not just those at the very top echelons of universities who enjoyed significant pay rises.
With institutions competing for billions of pounds of quality-related (QR) research cash in the 2014 research excellence framework, star research professors and senior managers were ideally placed to command larger salaries in 2013-14. Across the UK, talk on campuses swirled about big-money recruits arriving to boost a university’s research profile and QR funding. The cut-off point for inclusion in the REF was October 2013.
So did the REF year provide the expected fillip to professorial and senior management pay?
According to data commissioned from the Higher Education Statistics Agency by THE (see PDF table average salary of full-time staff 2013-14), the average pay of a university professor in the UK rose by £923 to £76,395 in 2013-14 – a 1.2 per cent uplift.
For other senior academics, such as pro vice-chancellors and heads of school, there was a £1,056 increase to £79,230 – a 1.4 per cent increase.
These rises, although modest, were more than twice as much in cash terms as the £422 extra awarded on average to other academic staff (click here for more data), whose pay inched up by 0.9 per cent to an average of £42,793. (Hesa’s average pay rise differs from Ucea’s as it includes all staff, whereas Ucea says it focuses on those in post for at least 12 months.)
However, some senior staff appear to have done very well in 2013-14. At Exeter, accounts show that the number of individuals earning £100,000 or more shot up by 72 per cent in one year while professorial pay rose by 4.1 per cent.
That was attributable primarily to the “one-off retention payments…introduced to retain key professors for REF 2014”, which were paid to 49 professors, according to the university’s annual accounts. Exeter says that bonuses were performance-related.
At City, where more than 100 academics are believed to have been hired ahead of the REF deadline, the number of staff earning £100,000 or more increased by nearly two-thirds to 113 in 2013-14.
City says that it recruited “outstanding academic staff from around the world”, which helped to double the proportion of its academic staff rated as “world-leading” in the REF to 40 per cent.
The REF is responsible for the upwards drift in senior pay across the entire sector, believes Mike Shattock, visiting professor of higher education management at UCL Institute of Education.
The estimated commercial value of the university-owned apartment provided to Craig Calhoun, the London School of Economics’ director, was £120,000
“If you are headhunting professors to rescue a department that rated low in the previous research assessment exercise, you are going to pay them higher salaries,” he says.
Other universities where the number of staff earning £100,000 or more rose significantly last year include the University of Oxford (up by 31 per cent to 399 in total), King’s College London (up 16 per cent to 229 from 197) and the University of Southampton (up 13 per cent to 120 from 106).
The number of high earners increased by 17 per cent within Russell Group universities last year and has risen by 53 per cent over the past five years, according to a THE analysis of financial statements.
Many of these individuals will have entered the £100,000+ pay bracket through the gradual accumulation of pay rises, with some medical scholars receiving part of their overall income through the NHS.
But the increasing number of highly paid university staff also reflects the move towards the “professionalisation” of second-tier university management, believes Shattock, a former registrar at the University of Warwick.
“In the old-fashioned faculty set-up, professors used to become deans for a couple of years with honorariums of £10,000 to £15,000 a year,” he explains. “Universities have restructured to create a very high number of permanent deans and pro vice-chancellors who are highly remunerated.
“Most universities have grown in size over the past decade, but the number of pro vice-chancellors has grown even faster,” Shattock continues. “Most institutions probably have more pro vice-chancellors than they need.”
Just how much senior administrators are paid remains unknown because universities are required to state only the exact remuneration of their institution head.
That remains the case even if these employees earn more than the vice-chancellor. At Oxford, three people were paid more than the £388,000 salary received by its vice-chancellor, Andrew Hamilton, last year, with one receiving just under £600,000.
For the time being, information about the remuneration received by highly paid staff will remain confidential thanks to a tribunal judgment: King’s College London launched an appeal after it was ordered by the Information Commissioner’s Office to release details of 125 staff earning more than £100,000 a year; and in October last year, its appeal was successful (“Salaries of well-paid scholars to remain a secret, tribunal rules”, 9 October 2014).
This outcome disappoints the University and College Union, which has branded the lack of transparency over pay and other benefits for senior staff a “national scandal”.
When the UCU requested minutes of the latest remuneration committee meetings – which determine senior pay – only half of institutions provided them, and a third of those offered were heavily redacted, according to its report Transparency at the Top? Senior Pay and Perks in UK Universities, published in March.
When approached for comment by THE, Nottingham Trent declined to provide details of the criteria that it had used to decide the level of reward for its former head.
Asked why the value of Gorman’s bonus payments – worth roughly an additional £50,000 a year on top of his salary – were not included in annual financial statements until he had retired, the university pointed out that it had declared the scheme’s existence, if not its details.
“These accruals have been declared in each year of the university’s financial accounts and published on its website for anyone to access,” says Richard Bullock, who chairs Nottingham Trent’s board of governors.
The institution did comply with the directions issued by the Higher Education Funding Council for England, which say that universities should declare “total remuneration…including bonuses (but not details of bonuses)” in their financial statements.
In its best practice guide, Hefce also asks universities to disclose vice-chancellors’ non-cash benefits, such as private health insurance, company cars and the value of any subsidised accommodation.
However, universities appear to take different approaches in respect of this advice. Many fail to report any details about the grace-and-favour homes they provide for their leaders.
Of those institutions that did declare the particulars of accommodation, the London School of Economics provided the highest value accommodation to its head.
The estimated commercial value of the university-owned apartment provided to Craig Calhoun, the LSE’s director, was £120,000.
Responding to a request for information by THE, Durham University said that the estimated annual value of the accommodation for its vice-chancellor was £24,000, while Imperial College reported that the university-owned Kensington apartment provided to its president was worth about £16,000 a year.
In all cases, the universities said that it was a contractual requirement for vice-chancellors to live in the premises, which were often used for university business, such as hosting events and receptions for staff, alumni and students.
However, about half of the 67 pre-92 universities approached by THE did not provide a response. Many insisted that they did not need to provide the estimated market rent of vice-chancellors’ homes (minus any rent payments) as suggested by Hefce.
The University of Liverpool did not state any figures in its financial statements relating to the home provided for its vice-chancellor – a detached home in the leafy Sefton Park area – saying that it was a “contractual requirement” for the institution head to reside there, and that it was used for corporate events.
The University of Stirling, which attracted criticism from unions in June 2013 for spending £150,000 on renovations to the vice-chancellor’s on-campus residence, including £45,000 on landscaping to create a “Himalayan crag garden”, took the same line.
“The principal lives in an official residence on campus as required by contract of employment – there is no monetary value assigned to this,” a spokesman says.
City University, where the student press has criticised the £200,000 spent on renovations to the vice-chancellor’s Islington townhouse, with an estimated worth of £2.5 million, says that it complied with Hefce’s directions. It cites commercial confidentiality rules, claiming that offering any more information about housing costs “may affect our competitive position”.
Aberystwyth says that it provides the upper floor of Plas Penglais, an 18th-century manor house valued at £2 million, for the use of its vice-chancellor but does not know the estimated monetary value of this provision.
David Palfreyman, co-author of The Law of Higher Education (2012), believes that a recent HMRC review of such perks has put a “big question mark over freebie accommodation for vice-chancellors”.
“There is a very shaky HMRC dispensation that such accommodation is necessary for the ‘better performance of duties’, in the same way as a school caretaker can live rent-free in the school grounds,” Palfreyman says.
“But whatever the tax issue, this does not stop universities from reporting the market rental value of the grand pad as part of the cost of having the vice-chancellor,” he adds.
Hefce says that it reviewed its guidance to universities on this issue in August 2014, which has “led to changes to improve the transparency of disclosures” regarding housing allowances.
But there are legitimate problems with establishing the value of university-owned homes, Palfreyman says.
“It can be difficult to establish the open market rent where the residence is on a campus amid 20,000 noisy students,” he points out. “Who would want to live alongside such neighbours as opposed to a grand pad off-site next door to other nice rich bourgeois folk?”
High, low and in between: pay ratios
According to a Universities UK efficiency review published in February, the pay gap between vice-chancellors and the lowest-paid staff has not changed dramatically in recent years.
In 2001-02, the ratio of “median head of institution pay” to the lowest point on the national pay spine was 15:1. This rose to just over 16:1 last year. That is below the 20:1 ratio considered by Will Hutton in his 2011 review of public sector pay, and well below the 232:1 ratio between the highest and lowest paid across FTSE 250 companies, says the report, Efficiency, Effectiveness and Value for Money.
It is, however, three times the 5:1 ratio proposed by the National Union of Students.
Ending poverty pay: living wage employers
Less than 10 per cent of higher education institutions are accredited living wage employers.
Just 14 institutions that feature in our pay survey are currently signed up with the Living Wage Foundation, which accredits organisations that pay all the staff on campus at least £7.85 an hour, or £9.15 an hour in London.
The University of Bolton, Cardiff University, the Open University, Glasgow Caledonian University, Leeds Trinity University and the University of Wolverhampton are among those outside the capital to pay the enhanced wage, which is about 20 per cent more than the £6.50 minimum wage.
Queen Mary University of London was the first institution within the capital to sign up with the foundation, and it has been joined by the University of East London, London Metropolitan University and the London School of Economics.
Several other institutions have also agreed to pay the living wage, such as the universities of Birmingham, Sheffield and Oxford, after long-running student campaigns.
Some, however, have been accused of having double standards after agreeing to pay the enhanced wage only to staff directly employed by the university.
The University of Manchester committed to the wage for its own employees in 2012. But unions claimed in November that it does not pay the enhanced rate to 262 of the 500 hospitality staff employed by a subsidiary company it owns.
Last July, the University of Cambridge said that it would pay its own fixed-term contract staff at least £7.65 an hour, last year’s living wage, although this does not apply to its colleges, where about 1,100 people were paid less than this in November 2013.
The Royal College of Art has outsourced its cleaning services, and some cleaners receive as little as £6.82 an hour for working through the night. One of these cleaners, Julian Marin, says it is “difficult to live on such a low salary”.
“Just the rent consumes 50 to 60 per cent of our earnings,” says Marin, who was part of an Independent Workers Union of Great Britain protest at the RCA on 3 March.
Cleaning staff employed by the RCA’s contractor Ocean Group will be paid £7.85 an hour from 1 May and the London living wage of £9.15 from September after a recent review of pay, says a spokeswoman for the RCA, which pays the living wage to all of its directly employed staff.
Rhys Moore, director of the Living Wage Foundation, says the pledge is important because it ensures that all subcontracted staff are paid a wage that reflects the real cost of living.
“By signing up to the voluntary Living Wage scheme, organisations make a firm commitment to their entire workforce that they want to help put an end to poverty pay,” he says.
According to the Universities and Colleges Employers Association, however, many universities ensure that their lowest paid staff receive at least the living wage. However, they do not want to be bound by a commitment to an external body such as the foundation.
“Being accredited is not necessarily what higher education institutions will do, even if they intend to match the living wage. Maintaining their own decisions over pay cost increases is a matter of great importance to them as autonomous institutions,” says a spokesman for Ucea.
“Many employers also continue to be concerned about the annual uprating mechanism for the living wage, which increases the rate by 2 per cent ahead of average earnings increases in the UK,” he adds.
Ucea points out that in August 2014, the lowest point on the most recent 51-point national higher education pay scale was agreed at £7.67 an hour. At the time, that was higher than the living wage, which was £7.65 an hour.
Many universities do not use the lowest two pay points on the national pay scale (£7.67 and £7.83 an hour), so their use is to be reviewed ahead of pay talks for the coming academic year, Ucea says.