Six in ten UK private sector employers uses merit pay, says IRS

Six in ten UK private sector employers uses merit pay, says IRS

The proportion of employers using merit pay has increased in the last year, despite the lack of conclusive proof that rewarding staff via an assessment of their performance actually motivates them, or leads to improved corporate profitability . A new survey by the London-based pay analysts Industrial Relations Services found that six in ten of the private sector companies uses individual performance-related base pay, up from just over half in 2000.

In spite of some damning high profile research casting doubt on the effectiveness of merit pay, 60.5% of IRS respondents use this remuneration tool and 13.6% are considering using it. And for the first time in three years, the proportion of respondents using merit pay has risen, up from 53.8% last year.

What about the alternatives to merit pay?

The evidence from the 190-company survey suggests that many of the alternatives advocated by commentators remain minority pursuits in the UK. In summary, IRS finds:

• Pay for competencies (used by 12.1% of respondents) is not yet a major feature of the reward landscape, and interest in this type of reward is declining . In 1998 just under one third of respondents were deliberating over whether to introduce competency-based pay, and 13.9% were actually using it.
  

• Only 4.7% of organisations use team-based pay, with a further 7.3% considering this approach.
  
• Linking reward to the acquisition and use of skills was reported by 11% of survey respondents, but this strategy is still languishing on the periphery of current reward practice .
  
• Gainsharing — which links remuneration to organisational gains such as sales, expenses and productivity — is the least popular of the reward practice IRS surveys, ranked twelfth in terms of usage.
  
  

Reward practices in UK private sector employers, 2001

Sample size: 190 private sector organisations.

Source: Industrial Relations Services.

Survey details

Title: The only way is down — pay prospects survey 2001 , IRS Employment Trends 739/Pay and Benefits, 1 November 2001.

Methodology: The data was gathered by postal questionnaire mailed to 2,500 IRS subscribers and 2,000 non-subscribers during early September 2001. The response rate was 4.2%.

Sample size: The survey was based on the views of senior remuneration, industrial relations and personnel managers in 190 private sector companies in the UK.

Business sectors: More than half of respondents were in services and four in ten were in manufacturing. There was a particularly large response from general services (18.5% of participants), followed by general manufacturing (15.2%), finance (14.8%), engineering and metals (14.3%), food, drink and tobacco (8.9%) and retail and wholesale (7.4%). Almost half the organisations surveyed employ between 100 and 999 employees, while over a quarter employ 1,000 or more.

Availability: Contact the subscriptions department at Industrial Relations Services, tel: 020 7354 6742, or for editorial enquiries email: Jeremy.baugh@irseclipse.co.uk.

For more details about IRS publications visit . . .

www.irseclipse.co.uk.

Posted 4 December 2001