We have now reached a proposed agreement on pay in BT. The terms of the agreement will be the subject of an e-ballot of all BT members. We will circulate the arrangements for the ballot separately to you, in the next week or so. Our current plan is to hold the ballot as soon as possible - opening it either late next week, or early in the week beginning 3 May.

We will be recommending very strongly that members vote for the agreement.

The proposed agreement is for a 2% increase in pay bill, which will be fully pensionable. There are also a number of further important features to the agreement which are explained below.

This has been a difficult pay round given the prevailing circumstances. It was always going to be a challenge. Nevertheless, the agreement overall is, we believe, a good one in these circumstances and also includes a number of features which we view as very positive.

The Basic Increase

There will be an increase to the Reward Framework pay bill of 2%. We have agreed the matrix approach that will determine how this award will be distributed and this will include some higher minimum increases for Benefit Band 1 managers. Whilst performance and range position will apply in the normal way, by using an approach based on separate matrices,we can ensure that a full 2% of pay bill will be made available to people in their respective bands. This will deal with the issue that has arisen in the past, where Band 2 and Band 3 people have received higher increases from the overall pay bill increase than people at Band 1. We will publish full details of the matrices when we publish the ballot information, hopefully in the next week or so.

Note also that there will be (modest) increases available for people who are appraised as GS. This is a breakthrough for the union and reflects the changed approach flowing from the revised appraisal arrangements agreed to recently. For the future, the new appraisal category of Development Needed will be treated similarly to the way GS will be treated this year.

These increases will be FULLY PENSIONABLE.

Higher Band One Bonuses

We have also agreed that the minimum on target bonus at Band 1 will be increased to 10%. At the moment, the OTB for the majority of people at Band 1 is 7.5%. This will increase to 10% in respect of bonuses paid in the next financial year (ie it will apply to bonus paid in 2011).

An Equal Pay Review

There will be an equal pay review - with increases payable on 1 January 2011. This will follow the pattern of equal pay reviews we have been conducting with BT for some time. The budget for the equal pay review will be determined in talks prior to 1 January 2011.

Starting Pay On Appointment (SPOA)

This relates to the way pay is dealt with where people are promoted within or newly appointed into the management grading structure.There will be four-monthly reviews of the application of SPOA. Our intention, through these reviews, will be to ensure that the SPOA arrangements agreed quite some time ago (which ensured for example that people were at least paid the minimum of the pay range for the role) but which have been suspended, will effectively be put back in place, albeit with a mechanism to ensure that they are being applied appropriately. The company is determined to ensure that through-year pay spend is controlled - something the union is also concerned to ensure happens. The company has given a commitment that people will be treated fairly under this mechanism and won't be disadvantaged.

Salary ranges are being Reviewed

Salary Ranges are being reviewed in separate discussions alongside the annual pay review. This review is still taking place but we hope to complete it by the end of this week. We can in the meantime report that a number of ranges, including a number at Band 1, will increase. We will of course publish these new ranges to coincide with the ballot, as the increased ranges will apply to the review on 1 June and the impact dealt with through this years review.

We will report further on the ranges and on the balloting arrangements. In the meantime, to ensure that you can take part in the ballot, please ensure that your membership details are up-to-date.

Our next communication will give you full detail of the proposed agreement, so do look out for it.