From the TUC

Performance-related pay

06 Jun 2013, by in Working Life

Come September, schools will be able to introduce performance-related pay for teachers. There have already been moves in this direction in the NHS and the Hutton Review proposed “earn back” for senior public servants – an element of basic pay at risk if key objectives are not met.

This is the wrong direction of travel. A survey by the Chartered Institute for Personnel and Development found that a majority of public sector workers are opposed and the evidence about the effect of performance-related pay on organisations’ performance is mixed at best. Of course, incentives influence workers’ behaviour – but that isn’t the same as getting the outcomes society would prefer.

Two recent US studies of piece-work underlined this. One found that piece work and bonuses encourage workers to take risks with their health and safety, leading to a “substantially higher risk of injury.” Another found that piece rates and monitoring workers can improve quantity or quality – but that there is a trade off between the two. Getting improvements in both “requires more committed workers.”

A 2007 review of research for the Office of Manpower Economics found that public sector workers do respond to incentives but sometimes this response takes the form of ‘gaming’: winning the bonus by “manipulation of behaviour that uses resources and does not increase productivity”.

And performance-related pay can have serious negative consequences. Earlier this year, an excellent post by Ken Mulkearn of Incomes Data Services pointed out that arguments about the distribution of bonuses can be vicious and that “merit-based” systems can actually destroy morale and team working. And when a substantial element of pay depends on a manager’s assessment – often with a very subjective character – the risks of favouritism and unfair discrimination are enormous.

The TUC is going to be discussing these issues at a seminar next Monday, here at Congress House. Alice Hood, our new Director of Strategy, will be chairing the discussion and the speakers include Kevin Courtney from the National Union of Teachers and Ken Mulkearn from IDS. We’ll also be looking at the disastrous record of “performance-related” pay for senior managers, with contributions from my Colleague Janet Williamson and Tom Powdrill from pensions and investment consultancy PIRC. The seminar will run from 12.00 till 2.00 and you can book a place at http://www.tuc.org.uk/events/detail.cfm?event=3589 or by emailing Jennifer Mann on [email protected]

One Response to Performance-related pay

  1. Public service pay and jobs squeeze goes on | ToUChstone blog: A public policy blog from the TUC
    Jun 26th 2013, 3:14 pm

    […] The third announcement was officially ‘new’ although it had been heavily trailed: the abolition of automatic pay progression. I blogged about the folly of this policy back in March when it was first mooted. Firstly, the government overstates the issue, ignoring the fact that many people are already at the top of their pay scale and so aren’t getting any annual pay uplift – IDS estimate that half of secondary school teachers and half of NHS staff are in this position. Secondly, pay progression is based on the principle that new, less experienced staff are paid less and as people increase their skills and experience over time they are rewarded through progression. This has an important part to play in attracting and retaining skilled staff to the public sector. It’s also an approach that is transparent and that great efforts have been made to equality-proof (such as with the Agenda for Change system in the NHS). Moving away from this kind of system will mean more potential for equal pay disputes over how ‘performance’ and decisions about any progression are made. My colleague Richard has a good post on the problems with performance related pay here. […]