Performance-related pay should be increased in public sector to drive reforms, says the CIPD

Public sector staff should receive private sector-style performance-related pay and bonuses to help drive reforms in public services, the Chartered Institute of Personnel and Development (CIPD) has said.

Ahead of the Emergency Budget next week (22 June), the CIPD warned “pay restraint in the public sector is vital” to minimise the forecasted 725,000 job losses by 2015, while government organisations have to stop rewarding poor and good performance equally.

Charles Cotton, reward adviser at the CIPD, said: “A refusal to make use of bonuses in the public sector removes one of the most powerful tools the new government has to drive up standards and deliver its many and stretching ambitions for public service reform and improvement.

“By linking pay far more closely to performance, ministers could find they are able to get far more bang for the taxpayer buck. Pay is far better used as a carrot than it is as a stick.”

Cotton added: “The frequent reliance on uniform, union-negotiated pay deals, and length of service as a determinant of individual pay progression, has ensured there is a disconnect in the minds of many public sector workers between their performance and the pay they receive.”

But the CIPD’s Coping with Less: Pay and pensions in the public sector report found any move towards more performance-related pay in the sector would likely face resistance from staff.

Just over one-third (36%) of public sector employees believe their pay should be based on their performance, compared to 60% of their private sector counterparts.

Meanwhile, only 6% of public sector workers viewed the performance of their organisation as an appropriate factor in determining their pay, compared to 35% of private sector staff.

The strength of unions in the public sector could also hinder the use of performance-related pay, as one-quarter (26%) of government workers would prefer a pay deal negotiated by trade unions, compared to just 4% in the private sector.

The CIPD report, which questioned 2,547 employees in the public and private sectors, also called for urgent reform of public sector pensions.

A financial analysis conducted by the report found that for every £1 public sector employees outside of local government contribute to their pensions, the taxpayer contributes £3.39.

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