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ORR report highlights efficiency improvements with focus on pay and reward

A recent report from the Office of Rail and Road (ORR) has found that the overall delivery of infrastructural efficiencies has remained good, seeing Network Rail report an estimated £840 million worth of improvements to their efficiency advancements. This improved on their overall target of £830 million, showing major growth in a difficult year for the industry.

Network Rail have now delivered £1.9 billion worth of efficiency improvements across the opening three years over Control Period 6 (2019-2024). This period will end in 2024, with Network Rail aiming to deliver £4 billion of efficiency improvements upon the culmination of this time, representing a significant increase on the estimated target of £3.5 billion set out by the ORR. This increase can be mostly accredited to the reformation of workforce initiatives.

These efficiency gains are a great indicator of performance growth within the sector; however, the wider financial targets have not been achieved to the same degree, seeing its target missed by a staggering £487 million in the 2021-2022 period. Due to the cost pressures and reduced annual income, Network Rail is currently £891 million below the targets established within its delivery plan.

The ORR also investigated whether the rail industry employment costs are higher or lower than market comparators, commissioning independent consultants to perform this evaluation. To uncover these results, the study compared the pay and total reward of 64,459 rail industry workers, discovering that certain areas of the industry have favourable pay and conditions when compared with the wider market.

The benchmarking analysis found that total reward at Network Rail is largely within market rates (+/- 10%), with the exception of maintenance staff. Their total reward is 18% above the market median. Within the broad categories of head office and operations, certain roles at Network Rail also sit outside market rates. For some job categories the result is sensitive to whether looking at total reward or just pay.

Total reward at passenger train operators has also been largely within market, apart from station staff who are paid 12% above the market median, and operational management who are paid 11% below.

Will Godfrey, ORR’s Director of Economics, Finance and Markets, said:

"ORR's annual assessment of Network Rail's efficiency and financial performance is an important part of how we hold the company to account each year. This year, we have supplemented our work with a study of employment costs.

“We were asked to undertake this study in the white paper on rail reform. And I’d like to thank all the companies who participated. It is a good first step in improving transparency.

"The complexity of rail pay arrangements can make it difficult for companies to produce data and to also make comparisons on a consistent basis. Particularly when the study depends on being able to find suitable comparators for rail jobs, which is easier for some types of jobs than others.

“The findings have identified areas where train operating companies and Network Rail can undertake further analysis of pay structures. We will now consider in consultation with industry the scope to update and refine this dataset.”

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