PAY STRUCTURES
Preliminary findings of IPD pay structure research
The Institute of Personnel and Development is currently undertaking a major research project to discover how the management of pay structures has evolved over recent years. The IPD has commissioned Michael Armstrong, managing partner of e-reward.co.uk, to undertake the project which will be published in 2000.
Underpinned by an extensive case-study research programme, provisional findings from the research show that pay structures in the UK are now characterised by great diversity — in terms of type, number of bands, number of job families and amount of structure. The study will highlight graphically the bewildering array of structures that are now operated by organisations in the UK.
The days of pay spines and narrow gradings are becoming a thing of the past, or as Armstrong puts it: "they are going if not gone". Companies have increasingly been moving towards market-driven pay structures and including more variable pay above the target rate for competent role holders.
Early findings from the IPD study include:
Broadbanding: what emerges very clearly from the research is that there is a tendency to structure broadbands more — for example, by defining zones within which progression in the same role can be rewarded, or by designating anchor rates with pay ranges around them. We are also seeing a move towards individual job grades within job families and broadbands. Meanwhile, in some organisations the broadbands have no fixed pay limits, with the dimensions defined by market rates for the jobs in the band.
Paying for contribution: one emerging trend revealed by the research is the growing interest in contribution-related pay — an approach to reward management in which organisations pay for competence (inputs) and results (outputs).
Managing the reward system: the trend towards devolving more responsibility for pay decisions to line managers continues to gather pace, with greater reliance placed on budgetary control rather than tight guidelines. The IPD study will also show that there is a tendency to make pay structures more transparent. In addition, organisations are taking a much more holistic approach to pay reviews — the idea of total pay is finally gaining ground, says Armstrong.
Performance-related pay: when it comes to the operation of performance-related pay, the IPD research will suggest that organisations are becoming much less reliant on pay matrices and performance ratings.
Lessons learnt
"Change management is the key" is Armstrong’s essential message for organisations embarking on a new pay structure. "Above all, you need to involve, communicate and train". He offers these three golden rules for getting it right:
generate trust and openness
ownership by line managers is vital
don’t underestimate the amount of support managers will need.
Want to know more? For further details of the pay structure project email: michael.armstrong@e-reward.co.uk