More flexibility in reward strategies could assist public sector efficiency drives

09 February 2006

A historical lack of flexibility in reward strategies in some parts of the public sector could restrict the chances of achieving efficiency and service delivery improvements across the public sector as envisaged by Gershon, according to new research by the Chartered Institute of Personnel and Development (CIPD).

However, on equal pay, public sector organisations are leading the way. The public sector should find itself well placed to recruit from a wide talent pool, as they are more likely to have carried out an equal pay review than their private sector counterparts. Over half (54%) have completed a review in 2006, compared with only 35% of private sector and 30% of voluntary sector organisations. And more employers are making sure equal pay reviews are carried out regularly and including variants other than gender, such as age and race.

Flexibility
The CIPD’s Reward Management Survey 2006, asked respondents to rate their reward strategies against a number of factors. When asked if their reward strategy was, ‘flexible enough to change when circumstances require’, public sector respondents rated their own reward strategy lowest with an average of 2.61 (where 4 is agree and 1 is disagree), compared with 3.18 for private sector services.

Charles Cotton, CIPD Reward Adviser, said, “Inflexibility can create a barrier to achieving business objectives and cause recruitment and retention problems. This can lead to the reward strategy becoming misaligned over time with business objectives. At a time when the public sector faces major changes following the Gershon review, a more flexible approach to reward could be particularly beneficial.

“Public sector managers are having to tread a fine line between meeting efficiency targets and maintaining employee motivation and commitment. Achieving this balance is a highly skilled task and crucial to raising performance in the public services. The reward strategy will have a direct impact on the ability of an organisation to motivate staff to deliver results at a time of change, and to attract the skills and experiences needed to achieve the objectives of change.”

Other findings

Line manager involvement: Public sector organisations are least likely to have confidence in front line managers skills in decision making and communicating total reward. Public sector respondents rated themselves an average of 1.55 (where 4 is very confident and 1 is not confident), compared with a private sector average of 2.13. Public sector organisations also admit that line managers do not receive enough training and support to acquire these skills.

Charles Cotton, says, “Training and involvement of line managers in reward decision making and communication is important as it give them a better understanding and the ability to communicate pay and benefit strategies to their team, which can help manage a flexible system and retain staff.”

Reward strategies: Public services are least likely to have a reward strategy, only 26% have a written reward strategy in place, compared to 38% of private sector services.

Pay progression: Public sector staff experience a slower pay progression and take longer to reach the top rate of their pay grade. In the public sector the expectation is that it will take six years to get to the target point within their pay grade. In the private sector the expectation time is only one or two years and three or four years, depending on grade.

Pay structures: Pay structure is less likely to be linked to market rate (17%) in public sector organisations than private sector (57%) and manufacturing and production organisations (51%), and length of service is more likely to be a consideration when deciding on pay progression in the public (62%) and voluntary sector (58%) compared to private sector services (18%).

Organisational performance is not even on the list of top five considerations in determining pay progression in the public sector with only 11% doing so, compared to 53% of manufacturing and production organisations and 43% of private sector services.

Bonus and incentives: 88% of private sector organisations offer a cash based bonus or incentive scheme compared to only 32% of public sector, of which almost two fifths (37%) are planning to change existing schemes to support changing cultural values.

Changes in 2006: The survey also found that public sector organisations will be busy in 2006 amending the way that their organisations structure pay, attach salaries to these structures and how pay progression is managed, with an average of 40% intending to make changes.

-ends-

Notes to editors
• The CIPD Annual Reward Conference is taking place at Olympia, on the 7-9 February 2006.
• CIPD have developed a Reward at Work portfolio – a range of courses, publications, a qualification and other key resources. For more information call 020 8612 6207, email rewardatwork@cipd.co.uk or visit www.cipd.co.uk/rewardatwork
• The Chartered Institute of Personnel and Development (CIPD) has over 124,500 members and is the leading professional institute for those involved in the management and development of people
• For a press pass please or an advanced copy of the reward survey, please contact: Charlotte Richardson on 020 8612 6406/ c.richardson@cipd.co.uk
• For more information about the Reward conference visit www.cipd.co.uk/rewardconference

Press enquiries:
Robert Blevin/ Gerwyn Davies/Emma Price/Charlotte Richardson
Tel: 020 8612 6400
Email: press@cipd.co.uk

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