Private sector staff believe pay should reflect performance

Just one in three public sector respondents think their salary should reflect their individual performance, compared to more than half of private sector respondents, according to research by the Chartered Institute of Personnel and Development (CIPD).

Its annual research, Employee attitudes to pay, which surveyed more than 3,000 employees, found that, in the private sector, 54% of respondents said their salary should reflect their own performance, while 36% said it should be aligned with inflation and the cost of living, and 32% said their pay should reflect their experience.

In the public sector, 55% of respondents said their pay should reflect inflation and the cost of living, while 36% felt it should reflect individual performance and 33% that it should reflect their experience.

The research also found that private sector workers felt strongly that those in the public sector should be paid according to individual (55%), organisational (33%) and team (26%) performance.

Public sector workers agreed that private sector workers should be paid based on how well they should perform, but were more reluctant to see their own pay linked to individual performance (36%), that of their team (11%) or that of their organisation (5%).

Just under a third (30%) of public sector workers said they believe that pay levels should be decided via a trade union-negotiated pay deal.

The survey also found:

  • The percentage of respondents who received a pay rise in 2012 increased from 45% to 48%.
  • Just 20% of public sector respondents got a rise in 2012, compared to 73% in 2008.
  • More than half (56%) of respondents in the private sector got a rise in 2012, compared to 64% in 2008.
  • Satisfaction with pay rises was higher among those who received an explanation from their employer than those who did not.
  • Employees who got a pay cut but received an explanation were more satisfied than those who experienced a pay freeze with no explanation.
  • The net agreement score for those who believe that senior pay is too high in their organisation is plus 23. By sector this ranged from plus 44 in the public sector to plus eight in the voluntary sector, with the private sector recording plus 18.
  • The net agreement score for those who feel motivated to perform well at work is plus 15. By sector this ranged from minus two in the public sector to plus 37 in the voluntary sector, with the private sector scoring plus 19.
  • The net agreement score for those who say that their organisation rewards success and achievement is minus 17. By sector this ranged from minus 58 in the public sector to minus two in the private sector and plus 31 in the voluntary sector.
  • Private sector and voluntary sector respondents were significantly more likely than their public sector counterparts to view their pay level as fair (57% private and 56% voluntary versus 42% public).
  • Two-thirds (63%) of respondents who are middle managers and above saw their pay levels as fair. The proportion of all groups below this level of seniority who perceived their pay as fair was even (between 48% and 51%).
  • By region, those employed in the north-east of England (42%) and Wales (43%) were less likely to have seen their pay rise over this period, while those working in the east of England (56%) were more likely to have enjoyed a salary increase.
  • 26% of respondents work for employers that operate a bonus scheme. Of those who are eligible for a bonus, 71% received one.

Charles Cotton, rewards adviser at the CIPD, said: “Establishing a closer link between pay and performance in the public sector is a key element to improving service delivery and value for taxpayers. 

“What’s more, unless the public sector starts linking pay to performance or better engages with those in the private sector about why their taxes should reward public sector workers differently, public sector employers could find it hard to legitimise pay decisions in the eyes of the private sector.

“However, linking pay to performance does not come without its management challenges. It’s encouraging to see that there is some appetite in the public sector for performance-related pay, with one in three workers agreeing that their salary should reflect their performance, but if performance-related pay is introduced, public sector managers will undoubtedly find it challenging to retain levels of motivation and engagement among those who think other factors should determine their pay.

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“Public sector employers would need to be prepared to invest in explaining why it thinks such reforms are needed and communicate the changes in the wider context of changes in the public sector ‘employment deal’.

“On the other hand, with younger employees more likely than older generations to expect to see their pay reflect their individual achievements, the public sector could face issues recruiting staff in the future if it does not start linking pay to performance.”