The reality of performance related pay

Camden UNISON bust the myths about performance related pay (PRP) which the council are trying to bring in as part of the new terms and conditions.

HR are attempting to sell the performance related pay (PRP) element of the new contracts to staff by claiming that they will “reward people based on their individual contribution”.

However, we believe the reality is entirely different. In one of the HR workshops about the new terms and conditions in children, schools and families, a manager asked if it is supposed to reward people based on their individual contribution, why were managers in her department told they couldn’t rate anyone higher than 3, or “good”? When HR tried to deny this practice, senior management confirmed that this instruction had been given, due to the results of an OFSTED inspection of the department.

Many managers have confirmed to UNISON that they are unable to give the appraisal ratings they want to people they supervise, as workers’ grades are forced downwards in “moderation”.

On top of this, the appraisal process does not only monitor performance, but also sickness. So outstanding performance could be penalised due to being ill or disabled. One UNISON member was downgraded from a 4 to 3 after being sent home sick by his manager for 5 days with swine flu earlier in the year which took his sickness to 7 days for the year.

UNISON has also represented senior managers, some of whom voluntarily moved on to performance related pay a couple of years ago. When PRP came in some members saw their appraisal ratings drop. One member was downgraded from a 3 to 2, despite the fact she had been on maternity leave for almost the entire year!

Other councils where PRP has been introduced have seen it used as a way of giving bonuses to senior managers at the expense of everyone else. One UNISON member’s experience of working in a borough with PRP was that the application of the scheme was highly subjective, and depended very much on your relationship with management and your grade. The member told us “UNISON there submitted a number of Freedom of Information requests as to what level of increments were awarded sorted by grade. After much prevarication when they reluctantly provided us with the figures, their hesitancy was understandable – managers awarded themselves on average 25%-30% higher performance measures than mainstream staff.”

And on top of all this, in Camden workers above scale 6 will no longer automatically get annual union-negotiated cost of living pay increases, which could easily counteract any supposed performance related increase when the pay freeze ends – which UNISON is currently campaigning for. Workers on scale 6 or below will no longer be able to get to the top of their scale, unless they get two consecutive years being rated at 4 or 5 – which may never happen.

Indeed, the council admits that they are making these changes to save £2 million per year – nearly £700 per employee. So we think it is highly unlikely that many workers will benefit from PRP in any way. And any benefit for some would be counteracted by the increase in the length of the working week with no extra pay – which equates to a 2.9% hourly pay cut.

What should I do?

  • Keep calm and do not sign up to the new contracts
  • Join UNISON if you’re not a member already, or get a colleague to join if you are
  • Get organised – elect a local union representative
  • Forward this article to colleagues
  • Read more about the new contracts here.
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5 responses to “The reality of performance related pay

  1. In addition, and PRP more generally here is part of an interesting article from the Financial Times, entitled “The case against performance related pay” from 17 April 2011:

    In a review commissioned by the British government, Will Hutton recently advocated a more elaborate system of performance-related pay for senior civil servants. Under Mr Hutton’s system the best would get more, while those below par would lose pay. Yet for teamwork jobs, like those in a government department or a large business, there is little evidence that individually-based incentive pay works. Indeed, there is plenty of evidence against it.

    In particular such annual fine-tuning brings at least four problems. The first is demoralisation. It is great to be recognised, but hugely discouraging not to be. Research shows that assessment by different assessors often favours different workers – so it is not surprising that feelings of bitter injustice are common. Everyone knows that a system of promotion is essential, but annual performance-related-pay, which grades colleagues into classes, introduces unnecessary tension. Co-operation not competition should be the dominant ethos.

    Without performance-related pay, the main motives to work well are the desire to be respected and pride in your job. Advocates of performance-related pay assume that these motives will be unaffected if a third motive is added – the quest for extra pay. But this is wrong. In fact there is good psychological evidence that offering short-term rewards distracts people. These experiments show that short-term rewards are effective for routine work, but not for problem-solving; those paid for getting things right actually do worse than those who are not paid.

    Other experiments show that paying people for doing something actually reduces their other motives for doing it – the most famous example being blood donation, which is often found to decline if payment is involved. It is hard for some economists to understand that human nature is more complex than their models. But most people like to feel they are giving of themselves and giving more than is expected.

    Even in the private sector there are plenty of successful companies that use no individual incentives at all, and their number is growing.

    For example, Zappos, the world’s largest online shoe-chain, works entirely on a 10-point code that describes how you should behave, with the aim of producing happy customers and colleagues. Applicants are quizzed to see if they accept the code, and those who pass their probation are offered $2,000 if they choose to leave. Very few do. Indeed, the company has more applications per place than Harvard, and was recently bought by Amazon for more than $1bn.

    Other companies have replaced individual financial incentives with incentives based on the performance of a group or the whole organisation. In the recent book Shared Capitalism at Work, the authors show that more than a third of US workers participate in such profit-sharing schemes, and these are associated with greater employee engagement and better performance.

    Individual performance pay is especially problematic in the public sector. Do we want subservient civil servants, looking over their shoulder for short-term approval, or people who passionately pursue the public good even when this involves telling uncomfortable truths?

    Proposals such as those from Mr Hutton could also harm recruitment to the civil service. He thinks it would improve it, but I doubt it. The general level of pay is, of course, crucial, but so too is the ethos. Good people will flood into public service if they can expect to be given responsibility and to identify with the department in which they work.

    Much the same is true in business. The way to encourage strong performance in public and private sectors alike is to motivate and appraise people properly, without creating sheep and goats. The consultants may like it, but for the rest of us such financial fine-tuning will do little good.

    The writer is the founder-director of the Centre for Economic Performance at the LSE, and author of ‘Happiness’

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  2. Pingback: Camden UNISON newsletter on new terms and conditions | Camden UNISON

  3. Pingback: Say NO to pay erosion! | Camden UNISON

  4. To me it seems that once your on this SCHEME the employers have a free reign to use the excuse that your performance is not upto the companies liking and standards. It also lets them put managerial work loads on to the people on the shop floor for a fraction of what the salary they would pay out to a manager to do the job. This may come and issue of over working saff resulting in errors in they work and eventual dismissle or them getting ill with stress. I am against this practice coming in as I am not a robot and my standards are on quality not quantity. I just hop my employer does not bring this practice in as the people we support will loose out.

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  5. Pingback: Say no to Performance Related Pay! | Camden UNISON

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