CIPD: Only 39 per cent of staff can see a clear link between pay and performance
Employers with tight pay budgets are “missing a trick” on reward strategy by failing to earmark a bigger portion of the wage bill for top performers, research has suggested.
The 2014 Towers Watson Talent Management and Rewards Survey found that pay was spread “more evenly” throughout the workforce than in previous years. While surprisingly, nearly a third of employers pay bonuses to their lowest performers.
The study of 32,000 employees from organisations worldwide revealed that only 39 per cent can see a clear link between their pay and performance. Less than half (43 per cent) of workers think their employer adequately rewards individuals for break-through ideas. And perhaps most worryingly, only 44 per cent said their company does a good job of explaining its pay and bonus structure to staff.
These findings show that UK firms are going against best practice in delivering compensation programmes to make the most effective use of their pay budget to attract, motivate and retain key talent. This is counter-intuitive as salary remains the main reason people choose to join or stay with an employer, the research showed.
Carole Hathaway, global leader of Towers Watson’s rewards practice, said: “Many forecasts are pointing to no significant wage growth until at least spring 2015, following many years when the real value of pay has been falling.
“Without the current flexibility to expand the pay pot, employers are missing a trick by not using the resources they do have more strategically when it comes to rewarding employees. Instead, they seem to be spreading what they have more evenly than ever in an attempt to keep everyone happy, rather than rewarding their best performers for going the extra mile.
“It is especially surprising that a third of employers are awarding a bonus to those employees with a low performance rating, a substantial increase since 2010. This impedes their ability to reward top performers as part of their pay for performance efforts.”
Employers recognise their own “middle-of-the-road” strategy on pay, with just 45 per cent of UK companies saying employee performance was fairly reflected in pay decisions. Only 42 per cent of employers believe workers understand how their base pay is determined, while just 36 per cent said their base pay programme is well executed