Whilst this section discusses reward systems in a manner which appears to offer a chronological explanation, we should note that the development of ‘new’ systems does not indicate the total removal of other mechanisms; indeed in many organisations we find that both ‘old’ and ‘new’ pay systems operate in tandem, delivering control on different levels for various groups of workers.
In terms of the types of reward mechanism applied we can note the application of a number of different mechanisms based on ‘time worked’. Time rates are mechanisms whereby reward is related to the number of hours worked and are often applied to manual workers in the form of hourly rates and non-manual workers by the application of monthly or annual salaries. A criticism of these mechanisms is that they are often related to historic rather than current value, and can result in discrimination, demarcation disputes and a sense of injustice.
Time-related mechanisms are often based on the notion of a pay spine in which groups of skills are banded. Although widely applied in their heyday, basic versions of these instruments are poor in terms of relating wage to current effort; often rewarding effort which has been applied externally (gaining a recognised skill) and are inappropriate to current tasks. The advantages of these systems are that management can control wage costs by limiting the access to various grades on the spine, can limit the range of the grade (say 4 per cent top to bottom) and can demonstrate they are fair in relation to agreed procedures.
The problems created are not necessarily with the pay spine system per se but with the manner in which skills relating to specific grades are defined; solutions must then address the structure, strategy and rationale of the reward system rather than the application of such mechanisms.
Adapted from Blauner (1964)
Conboy (1976) noted that the key advantage of these instruments is that both parties have a clear idea of the ‘wage’ element of the bargain. For management the problem is that these mechanisms do not give any clear indication of the ‘effort’ element of the bargain. This led to time rate instruments being complicated by the addition of ‘performance’ elements, often in the form of ‘piece-rates’ or other complex ‘bonus’ calculations in an attempt to determine acceptable effort levels (e.g. Predetermined Motion Time Systems and Measured-Day-Work).
The traditional form of such schemes can be demonstrated using the diagram shown in Figure.
The traditional form of time rate instruments
Many schemes give guaranteed basic earnings which are then supplemented in ways which we can class as proportional (wages increase in direct relationship to output), progressive (wages increase more than output or regressive (wages increase at a slower rate than output). An important element in this discussion regards the manner in which the ‘base’ element is decided. We have become familiar with the notion of a National Minimum Wage, which sets the minimum rate for specified groups; outwith this scheme, organizations need some mechanisms by which to assign values to various roles within the organisation.
Traditional mechanisms (and in a slightly modified manner ‘new pay’ systems) have related to job evaluation schemes. A job evaluation scheme operates by allocating values to each of a series of elements (e.g. skill or responsibility) and then measuring each ‘job’ in order to arrive at an agreed ‘score’. The scores are then placed on the pay spine in relation to accepted criteria. These criteria will be formed by the interaction of two sets of relativities.
Scores will need to reflect ‘external relativities’, by which we mean the situation that appears to hold in relation to external markets and environmental conditions, and ‘internal relativities’, meaning an appearance of fairness in relation to other jobs/roles within the organisation. In the basic form these schemes introduce us to the notion of reward packages under which different elements can be rewarded in various ways.
However, these schemes fell out of favour in some respects because they are seen to ‘pay-the-job’ rather than ‘pay-the-worker’, and as such were difficult to relate to individual performance.This is clearly the simplest form of wage payment system, easily understood by both parties; it allows the development of ‘overtime’ payments for work completed in addition to the contracted hours in any given period and formed the basis of the creation of systems classed as payment by results (PBR).
We can conclude then that such payment by results systems, whilst originally crude, developed alongside the more extensive division of labour achieved by the increasing use and application of technology, ergonomics (pseudo-scientific work measurement) and mechanical production methods. These early techniques can be easily applied to such divided work because of four basic characteristics of such work:
The simplistic assumptions underlying these and other PBR systems are twofold. Firstly, workers are motivated to increase performance (work harder) by money, and secondly, any increases in output will result in equivalent increases in wages. The schemes are intended to be self-financing and designed to reduce ‘wasteful activity’ in that they can be used to redesign the labour process. Whilst such schemes now enjoy less popularity than they have in previous decades, there is still evidence that they are used in relation to specific groups of workers.
Table shows that while there has been an overall decline in the application of PBR techniques, the decline is not as marked as some proponents of ‘new pay’ (see below) would argue. The heart of this debate suggests that such schemes can be seen as various techniques designed to act upon worker motivation and as such provide incentives for an individual t reassess the wage/effort bargain.
Percentage of employees receiving PBR
In order to assess the effectiveness, validity and reliability of such arguments we need to consider the underlying assumptions in a little more detail.
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