Human resource management practice I also available by michael armstrong

Service-related pay

Pay progression in some organizations, especially in 

the  public  and  voluntary  sectors,  can  be  provided 

by fixed increments on a pay scale or pay spine re-

lated to time in the job (service-related pay). There 

may  sometimes  be  scope  for  varying  the  rate  of 

progress  up  the  scale  according  to  performance. 

Service-related  pay  is  supported  by  many  public 

sector unions because they perceive it as being fair 

– everyone is treated equally. It is felt that linking 

pay to time in the job rather than performance or 

competence  avoids  the  partial  and  ill-informed 

judgements about people that managers are prone 

to make. Some people believe that the principle of 

rewarding  people  for  loyalty  through  continued 

service is a good one. Service-related pay is also easy 

to manage; in fact, it does not need to be managed 

at all.

The  arguments  against  service-related  pay  are 

that:

 

●

it is inequitable in the sense that an equal 

allocation of pay increases according to 

service does not recognize the fact that some 

people will be contributing more than others 

and should be rewarded accordingly;

 

●

it does not encourage good performance; 

indeed, it rewards poor performance equally;

 

●

it is based on the assumption that 

performance improves with experience but 

this is not automatically the case;

 

●

it can be expensive – everyone may drift to 

the top of the scale, especially in times of low 

staff turnover, but the cost of their pay is not 

justified by the added value they provide.

These  arguments  have  convinced  most  businesses. 

However,  some  are  concerned  about  managing 

any other kind of formal contingent pay scheme, eg 

merit pay, and are content to rely on spot rates that 

they can increase informally at will whenever they 

think someone is worth more. In the public sector, 

the UK government in 2013 announced its intention 

to  abolish  automatic  pay  increases.  There  will  be 

strong resistance from the public sector trade unions 

to this move.