If you are managing, a system of payment with the objective that those being paid should regard the system as being fair, would you relate the payment to the demands of the job or to the relative performance of individuals doing the job?
2. Types of Pay System4
1. Job-based: Job evaluation 4
2. Person-based: Performance-related pay (PRP)5
2.2.1 Individual PRP or Classic PRP or Merit Pay 6
2.2.2 Competency based pay (CBP) 6
2.2.3 Contribution-related pay (CRP)7
3. Key Issues8
1. Culture/ Organisational Strategy 8 2. Equity and Equality9
Pay systems are method of rewarding people for their contributions to the organisation. (ACAS, 2006) and is also the biggest single cost for universities (THES, 2007) therefore it is important to ensure it is managed correctly. Lawler (1990) emphasised that too much attention is focussed on reducing pay costs and too little is focussed on increasing the benefits of the pay system. This is supported by Williamson (1975) who believes that firms rationally choose seniority based systems because they want to avoid the high ‘transaction cost’ of specifying and measuring individual contracts based on performance. However Performance Related Pay (PRP) is becoming more dominant as reported benefits include; increased employee effort, motivation and improved organisational performance (Armstrong and Murlis, 1994; Brading and Wright, 1990 as cited in Storey and Sisson, 1993; Bratton and Gold, 2007).
A recent research by the Universities and Colleges Employers Association (UCEA) has found that pay rises in higher education are still firmly linked to years of service rather than performance...