CIPD research finds gulf between public and private sector staff on what factors should drive salary increases
Efforts to reform public services will be undermined unless public sector employees recognise that their salaries should also reflect their performance rather than simply tracking the cost of living.

This is the view of the Chartered Institute of Personnel and Development after its annual Employee attitudes to pay survey reveals that just one in three public sector workers think their salary should reflect their individual performance, compared to more than half of private sector workers. In the private sector, 54% believe that their salary should reflect their own performance, 36% inflation/the cost of living and 32% their experience. In the public sector, workers feel their pay should reflect inflation/the cost of living (55%), individual performance (36%) and their experience (33%).

The survey also found that how individuals would like to get paid also influences how they think other workers should get paid. Private sector workers feel strongly that those in the public sector should be paid according to individual (55%), organisational (33%) and team performance (26%). Public sector workers agreed that private sector workers should be paid based on how well they should perform, but are more reluctant to see their own pay linked to individual performance (36%), that of their team (11%) or that of their organisation (5%). Three in ten public sector workers (30%) believe that pay levels should be decided via a trade union negotiated pay deal. This is the highest it has been since 2010 and possibly a reaction to the recent pay restraint in that sector.

Charles Cotton, rewards adviser at the CIPD, comments: “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 amongst those who think other factors should determine their pay.

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.”

Anne Gibson, Past President at the Public Sector People Managers Association (PPMA), comments: “Different attitudes between employees in the public and private sectors have been shaped by historic differences in approach between the sectors, including the existence of national pay review bodies for groups such as teachers, police and fire-fighters.

“Many public sector organisations are re-thinking their approach to pay and reward, recognising that the reward systems of the past are no longer fit for purpose. Now more than ever they need employees who are motivated to do the best they can, are committed to public service and are resilient enough to thrive through the continuous cycles of change. Pay, reward and recognition are not the only factors in a necessary ‘new deal’ for public sector workers, but they have an important part to play. Reward systems need to build on the commitment public sector workers have to the job they do in order to drive up performance and productivity, and therefore make them affordable.

“There is an emerging focus in the public sector on segmented pay to suit different groups of staff – but we will need to weigh carefully the impact of further or more radical change to reward in the public sector on employee engagement and motivation, which is such a key factor in organisational performance. One way or another, pay and reward are going to be under the spotlight, not just because of the need to contain costs, but because getting it right will support employee engagement and performance.”

“Of course, it is one thing to say that you pay for performance; it is another thing to do it,” adds Cotton. “Just three in ten employees believe that their organisation is good at assessing their or their team’s performance, while just two in five believe that it is good at assessing the contribution of senior managers.

“There could also be a mismatch between how employees define performance and what their employer means by performance. What’s more, while linking individual achievements to pay can be appropriate where work is simple, specific and measureable, many jobs in the public sector are not so easy to measure and even in the private sector the trend is away from such work, as the economy becomes more volatile, uncertain, complex and ambiguous, and businesses have to become more nimble and resilient. This may mean that team and organisational performance will become just as, and possibly more, important than individual success. In addition, rather than simply focusing on what has been achieved, employers will also have to look at the values, behaviours and attitudes that underpin sustainable performance at an individual, team and organisational level”.

Other findings from the annual Employee attitudes to pay survey include:

  • Since 2008, we have witnessed a steady decline in the proportion of employees enjoying a pay rise, but in 2012, the percentage of workers getting a pay rise increased from 45% to 48%
  • Just 20% of public sector workers got a rise in 2012, compared to 73% in 2008. 56% of those in the private sector got a rise in 2012, compared to 64% in 2008
  • Of those who got a pay rise, only 26% got one that matched or bettered the cost of living
  • Of those who received no salary increase in 2012 (47%), 22% report that they have had no pay rise since 2008 and beyond
  • 26% of employees work for employers that operate a bonus scheme. Of those eligible for a bonus, 71% received one
  • Satisfaction with pay rises is higher amongst 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 got a pay freeze but no explanation
  • The net agreement score for those who believe that senior pay is too high at their organisation is +23; by sector this ranges from +44 in the public sector to +8 in the voluntary sector, with the private sector recording +18
  • The net agreement score for those who feel motivated to perform well at work is +15; by sector this ranges from -2 in the public sector to +37 in the voluntary sector, with the private sector scoring +19
  • The net agreement score for those who say that their organisation rewards success and achievement is -17; by sector this ranges from -58 in the public sector to -2 in the private sector and +31 in the voluntary sector
  • Private sector and voluntary sector workers are 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 middle managers and above see their pay levels as fair. The proportion of all groups below this level of seniority who perceive their pay as fair is even (between 48% and 51%)
  • By region, those employed in the north-east of England (42%) and Wales (43%) have been less likely to have seen their pay rise over this period, while those working in the east of England (56%) have been more likely to have enjoyed a salary increase.