More employers linking raises, bonuses to performance

Public sector cutbacks, marginal private sector growth having an impact: Survey
||Last Updated: 05/26/2011

Public sector cutbacks and marginal private sector growth continue to impact organizations’ ability to reward employees, according to a survey by the Chartered Institute of Personnel and Development (CIPD).

Just under two-thirds (65 per cent) of employers have, or are planning to, increase base pay in 2011 while 26 per cent have or will freeze pay. Almost one-in-10 (nine per cent) have decided to delay the pay review and 99 per cent plan to not cut pay, found the survey of 280 respondents in the United Kingdom.

Market rates are considered the most important factor in determining pay levels for 60 per cent of those surveyed. Ability to pay is the most important factor for one in four organizations (26 per cent). For managing pay progression, the most common approach is to link pay to a measure of individual performance (61 per cent), either on its own or in combination with another factor, such as competencies.

Two-thirds (67 per cent) of organizations are operating performance-related reward schemes, found CIPD. Merit pay rises (56 per cent) and individual bonuses (54 per cent) are the most common forms of performance-related reward. One in three (29 per cent) organizations also operates individual non-monetary recognition awards for clerical and manual employees.

"In the context of public sector spending cuts and cautious economic growth in parts of the private sector, it's not surprising that not all organizations have been in a position to make a pay award this year. The findings also show that this competitive environment is having the effect of encouraging employers to focus on linking pay raises and bonuses to employee and organizational performance,” said Charles Cotton, performance and reward adviser at CIPD.

"We expect that there will not be much change to the proportion of organizations making a pay award in 2012. This is again due to a public sector that doesn't have much money to play around with as employers freeze pay, scrap bonus schemes and ask employees to pay more towards their pensions. Some private sector organizations will also find it hard to increase pay if their part of the economy does not grow as quickly as anticipated."

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