REWARDING PERFORMANCE
E-reward publishes new performance pay toolkit
What is contingent pay and when is it likely to be appropriate? What factors should be taken into account when making a choice between the different types of pay for performance, competence, contribution or skill? What approach should be used to plan and implement a new scheme? A new e-reward.co.uk toolkit offers some timely, practical advice.
The first half of this two-part study published in the January 2004 issue of e-research reported our initial analysis of the findings of the e-reward.co.uk contingent pay survey (see our review published in the News section of this site, 9 March 2004). Information was received from 100 UK operations with a performance, competence, contribution or service related pay scheme or using skill-based pay. The survey, which is one of the largest research projects in recent years in this field, examined all the main aspects of contingent pay to find out more about its relevance in today's organisations.
| Contingent pay defined |
| Any type of pay which is related to, or dependent on, performance, competence, contribution, skill or service in the job. Contingent pay may be related to the results achieved by individuals, teams, large parts of the organisation or the organisation as a whole. |
Commentary
"PCC pay -- paying for performance, competence or contribution, excludes service-related pay"
Here, in this commentary, we examine some of the key issues arising from our initial analysis as highlighted by the survey. These are:
But first, Michael Armstrong explains why, in spite of the negative views of many commentators, contingent pay continues to flourish.
Toolkit
Our 37-page supplement to the March issue of e-research contains a practical toolkit describing what you need to do in order to develop and implement a contingent pay scheme. It offers a systematic and comprehensive approach for analysing, diagnosing and designing a scheme, highlighting all the key phases involved.
Use this toolkit to understand the:
This toolkit includes:
| What you will find in this e-reward.co.uk report | |
| Written and researched by e-reward.co.uk, this report is published in two sections:
| |
| 1. COMMENTARY | Page no. |
| Introduction | 5 |
| Overview Why does contingent pay continue to flourish? -- Reservations about PCC pay | 6 |
| Choice of approach Types of contingent pay scheme used -- Extent of contingent pay practices in UK -- Cash or consolidation | 8 |
| Objectives, effectiveness and impact of PCC pay Reasons for using PCC pay -- Meeting business needs -- Evaluating contingent pay -- The problems of PCC pay | 15 |
| The design factors Choice of criteria -- Process for assessment -- Rating — Doing without ratings -- Decoupling performance and pay reviews -- Process for converting assessments to pay decisions -- Pay decision guidelines | 19 |
| Areas for development and views on issues Contribution-related element -- Competence-related element -- Performance-related element -- Decoupling performance and pay reviews -- Performance rating -- Use of pay matrix -- Guidelines to managers | 24 |
| Making it work The pitfalls -- What needs to be done | 27 |
| List of boxes 2.1: Incidence of contingent pay -- UK survey evidence 3.1 Evaluating pay systems 3.2 Pros and cons of devolving pay decisions to line managers 4.1 Arguments for and against rating 5.1 How many levels? | |
| 2. TOOLKIT | Page no. |
| Introduction What are the alternatives? -- Change management -- Questions answered by this toolkit | 5 |
| What is contingent pay? Definition -- Types of contingent pay | 6 |
| Choosing a scheme Choice of approach -- Key requirements -- Arguments for and against paying for performance, competence or contribution | 8 |
| What are the success criteria? Specific criteria -- PCC pay is difficult to manage well | 18 |
| Introducing contingent pay Project planning -- Analyse situation and requirements -- Diagnosis -- Proposals: development and evaluation -- Action plan -- Implementation -- Monitor and evaluate | 22 |
| Appendix A: Implementing contribution pay -- 21 questions | 35 |
| List of boxes 2.1: Incidence of contingent pay 3.1: Summary of factors affecting choice 3.2: Comparison of contingent pay schemes 3.3: Impact of different contingent pay schemes 5.1: General problems caused by deficiencies in the reward system 5.3: Final proposals -- questions to ponder | |
| List of checklists 3.1: How ready are you for contingent pay? 3.2: How ready are you for individual performance-related pay (merit pay)? 3.3: How ready are you for competence-related pay? 3.4: How ready are you for contribution-related pay? 3.5: How ready are you for skill-based pay? 3.6: How ready are you for linking rewards to organisational performance? 3.7: How ready are you for gainsharing? 3.8: How ready are you for team pay? 4.1: Individual contingent pay -- criteria for success 4.2: Individual performance-related pay (merit pay) -- criteria for success 4.3: Contribution-related pay -- criteria for success 4.4: Team pay -- criteria for success 5.1: Evaluating contingent pay schemes 5.2: Reviewing your merit pay scheme for sex bias |
Want to know more?
Title: What is Happening in Contingent Pay Today: Part 2 — Commentary and Toolkit.
Issue no.: e-research no. 20.
Date: March 2004.
Pages: 66 pages (23,600 words).
Availability: Published by e-reward.co.uk. Click on "Research Reports" on the left-hand navigation panel of the e-reward.co.uk web site and complete the simple online subscription form at www.e-reward-data.co.uk/content/ResearchReports.asp
For more details email: paul@e-reward.co.uk
Posted 22 April 2004