PUBLIC SECTOR
CIPD calls for greater use of performance pay in public sector
The coalition government needs to find the courage to make greater use of performance-related pay and bonuses in the public sector, not less, to maximise value for the taxpayer and drive through substantial public service reform. This is one of the key recommendations of a new report from the Chartered Institute of Personnel and Development.
Effective and early communication with public sector employees about the “scale of the problem” and meaningful consultation over possible options will be crucial to maintain employee morale, the CIPD says.
The report also calls for:
greater regional flexibility in public sector pay to take into account variations in labour market conditions and cost of living in different parts of the country
more emphasis on the total reward package offered to employees
an increased use of recognition schemes and non-cash incentives
the publication externally of the work achievements of all employees earning more than £58,500 in addition to their job titles, salaries and job descriptions
more flexible pay grades and progression mechanisms that allow individuals to progress through their grades faster
a freeze in the overall public sector pay bill, allowing more flexibility for employers to address specific recruitment challenges and reward good performance than a crude freeze on all individual salaries.
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Charles Cotton, Reward Adviser at the CIPD, said: “Given the state of our public finances, and with CIPD analysis now forecasting 725,000 public sector job cuts in the next five years, pay restraint in the public sector is vital.”
He added: “By allowing emotive headlines about ‘snouts in the trough’ to ensure any kind of performance-related pay in the public sector becomes morally unacceptable, ministers are simply conceding that poor performance and excellent performance should, fundamentally, be rewarded equally.”
Attitudes to pay determination
The report highlights statistics showing that expectations of how employees’ pay should be determined varies dramatically between public and private sector workers:
Only 36% of public sector employees believe they should be paid based on how well they personally perform, compared with 60% of their private sector counterparts.
Only 6% of public sector workers see the performance of their organisation as an appropriate factor in determining their pay, compared with 35% of private sector workers.
More than half of public sector workers highlight the cost of living as one of their preferred determinants of their pay (the most popular choice for this group), compared with a third (33%) in the private sector.
A quarter (26%) of public sector workers point to a trade union negotiated deal as one of their preferred determinants of their pay, compared with just 4% in the private sector.
A final word
“A refusal to make use of bonuses in the public sector removes one of the most powerful tools the new government has to drive up standards and deliver its many and stretching ambitions for public service reform and improvement. Conversely, the status quo is an approach to pay that does little to support meritocracy, and may foster mediocrity. By linking pay far more closely to performance, ministers could find that they are able to get far more bang for the taxpayer buck. Pay is far better used as a carrot than it is as a stick.
“The frequent reliance on uniform, union negotiated pay deals, and length of service as a determinant of individual pay progression has ensured that there is a disconnect in the minds of many public sector workers between their performance and the pay they receive. We need to move beyond this to an approach in which individual and collective performance and achievement of results becomes a significant determinant of how much taxpayers’ cash public sector workers take home.” - Charles Cotton, Reward Adviser, Chartered Institute of Personnel and Development.
Want to know more?
Title: Transforming Public Sector Pay and Pensions, Chartered Institute of Personnel and Development, June 2010.
Availability: The 20-page report is available to download in PDF format from the public policy publications section of the CIPD web site at www.cipd.co.uk/publicpolicy.
The Chartered Institute of Personnel and Development (CIPD) is “Europe’s largest HR and development professional body with over 135,000 members, supporting and developing those responsible for the management and development of people within organisations”. To find out more visit www.cipd.co.uk.