Scottish Government's pay rules in 'disarray' over ferry firm bonuses

Scotland's public sector pay rules are under new fire after the Scottish Government-owned Ferguson Marine handed out a new wave of bonuses in the wake of the ferry-building fiasco having reached over £200,000 in three years.

A total of £86,551 was paid in 2022/23 to executives at Ferguson Marine (Port Glasgow) despite past concerns from the First Minister about the payouts.

The Scottish Government's public sector pay policy rules, which regulate how public money is being spent, have maintained a suspension of performance related bonuses for over seven years.

According to the Scottish Government, the suspension allows public bodies to maximise the resources available to them to "address fair pay issues and pay restoration".

David Tydeman, the yard's chief executive received almost £40,000 in bonuses, with a further £47,217 paid to eight other staff.

It is part of a performance related bonus scheme aimed at incentivising and retaining staff.

The bonus bill to Ferguson Marine management had reached £134,218 over two years, while two long-delayed lifeline ferries, Glen Sannox and Glen Rosa, are still to be delivered six years late with costs expected to quadruple from the original £97m contract.

In April, First Minister Humza Yousaf told the Scottish Parliament that it was "his expectation" that bonuses should not be paid for the 2023/24 financial year.

But roll forward over six months and Audit Scotland have said it has all happened again, with further payments made in 2022/23 without the express approval of the Scottish Government.

It emerged that despite scrutiny over the bonuses, two recipients who do not have a bonus clause included within their original employment contract were invited to join the scheme for the 2022/23 financial year, by letter in December.

Audit Scotland said that the bonus payments represent a "significant deviation" from the Scottish Government's pay policy.

That is despite the fact that Ferguson Marine is not on the list of publicly funded bodies that have to abide by the rules.

One that is on the list, Scottish Water, has not received the same level of audit and government scrutiny over bonuses as Ferguson Marine.  

It has had approval to give much greater bonuses than Ferguson Marine in a bid to retain staff in the same way that the shipyard firm has.

The three key executives of the nation's state-owned water supplier have received nearly £1m in bonuses in the past five years.

When the decision to pay bonuses to Ferguson Marine emerged in April, Douglas Ross, leader of the Scottish Tories, said: "The two ferries are not fit to sail, the costs continue to spiral out of control, and islanders continue to be left without vital, lifeline services – so First Minister, what on earth could these bonuses be for?"

By then Auditor General Stephen Boyle had branded the payouts “unacceptable” and deputy first minister John Swinney described them as "reprehensible".

Responding, Mr Yousaf said: "Those bonuses, I have asked if they can not be paid and the advice coming back is that they are a contractual obligation.

"For any future discussion or consideration of bonuses, I have made it clear there should not be bonuses paid in relation to [the ferries]."

Read more:

Scotland's Ferries | Exclusive: Move to charter two 'emergency' ferries amidst new ferry delay

One union official believed that the pay policy of the Scottish Government was "almighty muddle" with "one rule for one and one for another".

He said: "Public spending rules have to be consistent as this is the taxpayer's money that we are talking about but they just don't appear to be. From this angle it looks like it is in disarray."

He mused: "Perish the thought that politicians might be politicising over the shipyard which desperately needs our support to save jobs," he said.

The Herald previously revealed that in a framework agreement with Scottish Government, FMPG is not required to comply public sector pay rules.

It says that this was on the condition that Ferguson Marine "maintain regular dialogue" with ministers on any pay proposals, with an expectation that these will be "broadly consistent" with the provisions of the pay policy.

External auditors looking into the financial status of Ferguson Marine admitted there was a "lack of clarity" and "lack of defined requirements" over the framework.

Ferguson Marine chairman Andrew Miller, who had been leading a review into the payment structure at the yard, said its bonuses were "retention payments" and that senior managers were legally entitled to them under their employment contracts.

Sign up for Scotland's Ferries and get extra from the journalist who broke the story.

A Scottish Government spokesman said: “Despite every effort being made to ensure that no bonuses were paid to Ferguson Marine Port Glasgow (FMPG) senior management in 2022/23, it proved unavoidable due to historic contracts at the yard.

“Contracts for new FMPG employees do not include bonus elements and the First Minister has been clear that new contracts for members of the senior management team should not include bonuses being paid directly for vessels 801 and 802.

“Parliament will be updated with full details of the revised senior management team remuneration scheme once it is finalised.”

The Scottish Government did not explore what the difference was between the right to bonuses for Ferguson Marine and Scottish Water.

A spokesman said that Scottish Water’s current remuneration package is "significantly smaller" than that paid by comparable utilities, and bonuses are only paid in the event of outperformance of demanding targets that are verified by independent regulators.

The spokesman said Scottish Water is publicly owned, which means that, unlike private companies, every pound raised is re-invested in our water industry, "while on average our water charges remain lower than in other parts of the UK".