Many countries have mechanisms in place whereby wage rates and/or wage increases are agreed at a national level. Some countries have a social partnership system, whereby government, employers and trade unions agree pay increases for all workers.

Another common method is collective bargaining, where trade unions negotiate pay rates on behalf of employees, trades or sectors. So if pay rates and increases are agreed in advance, why then you might ask would the wages bill be higher than the agreed rate (or standard)? One reason may be that a higher skilled, higher paid grade of employee may have worked on the product/process than planned. Another reason might be unplanned overtime, which incurs a higher pay rate than normal working hours. A report in the Telegraph in August 2010 reported on the high levels of overtime at the London Metropolitan Police (or the Met as it’s more commonly known). According to the report, police officers were paid a total of £129 million in overtime for 2009. It also adds that the overtime bill has doubled in the preceding decade. We don’t know if wage rate variances are calculated at the Met, but overtime hours would definitely increase the rate of pay, thus causing an adverse wage rate variance.

Questions 

1 If you were preparing the wage budget for the London Metropolitan police, would you consider including overtime?

2 Is there anything the police force could do to reduce its overtime bill and prevent cost overruns?