Government approach to public sector pay misconceived

PUBLIC SECTOR

Government approach to public sector pay misconceived

The government's reliance on misguided notions about how the private sector pays people, and why, is laid bare in a study by Peter Reilly of the Institute for Employment Studies. According to the study, the Labour administration should not be pushing the public services to mimic what they perceive to be private sector reward practice. Rather than encouraging the take-up of performance-related pay for public servants, the emphasis should be on a more participatory management style, greater staff involvement in job design and more investment in training and development.

Successive Labour and Conservative governments have enthusiastically backed pay "modernisation" programmes across the public sector, driven by a determination to push reform in public service delivery. Irrespective of the party in power, the focus for the past 15 years has been on devolved pay, regional pay, market-based reward and performance-related pay.

But has this relentless chase after the perfect pay system in the public sector all too often been reflected in pay fads and fashions rather than rational decision-making? Yes, is the only conclusion to be drawn from a catalogue of reward myths laid out for inspection by Peter Reilly in a recent edition of the journal Public Money & Management.

Reilly, who is director of human resource research and consultancy at the Institute for Employment Studies, reckons that much government thinking in reward is fundamentally misconceived. He comments: "The driving force behind the political agenda is the notion that the public sector should mimic the private. There are two key problems with this view: it misconceives private sector practice and it ignores the fact that the two sectors are very different."

Growth of innovative pay systems in private sector far from spectacular

Reilly's contention is that many elements of the so-called "new reward" agenda, promoted by UK governments, are not in fact widespread in the private sector. He cites three prime examples of how the government has misunderstood private sector reward practice:

• Reward strategy: The private sector has only adopted "new reward" practices in a piecemeal fashion, says Reilly. "There is little evidence that companies are taking a strategic direction in reward, rather they are being short term and tactical in their approach."
• Individual performance-related pay: Merit pay based on a simple objective-setting process has "given way to more sophisticated ways of linking pay to performance".
• Regional pay: Contrary to received wisdom, many large private sector companies do not, in fact, differentiate pay by location, says Reilly. "This may be because of the difficulties and resource implications of gathering and maintaining quality information or by concerns over generating wage inflation through leapfrogging."

What really motivates public sector staff?

Reilly’ s critique covers not only fictions about reward practices in the private sector, but also the role of financial incentives in motivating public sector workers. He reckons that the government needs to acknowledge that pay is not the only, nor often the ultimate motivator for public sector workers. Reilly writes: "Do policy-makers understand what attracts, retains and motivates staff in the public sector and recognise that the evidence is that sources of motivation are different between sectors? The intrinsic nature of the job, often as part of a vocation, is what motivates public sector staff."

For Reilly, key government pursuits such as enhancing commitment, encouraging better performance and improving the delivery of public services can rarely be achieved through "remuneration, and especially performance-related pay" alone. "To improve delivery of public services, the government should take note of what attracts, retains and motivates those who are critical to achieving this objective. It should ignore pay fads and fashions from elsewhere."

His essential message is that public sector employers need to emphasise those areas where they appear to have a competitive advantage (take, for example, training and development, a commitment to careers or flexible working hours) or that draw a positive response from staff (forms of non-financial recognition).

But to do this, Reilly reckons that it is vital to improve the people management skills of line managers: "This means managers empowering staff so that they can maximise the control they have over their job. It means recognising the contribution of colleagues, without relying simply on financial reward. It means developing staff for their own and the organisation's benefit."

A final word

Want to know more?

Title: "New approaches in reward: Their relevance to the public sector", by Peter Reilly, Public Money & Management, October 2003.

Availability: The journal Public Money & Management is published by Blackwell on behalf of the Chartered Institute of Public Finance and Accountancy. To find out more visit www.cipfa.org.uk/pmpa/

Posted 16 July 2004