Smart moves: Fistful of skills, fistful of dosh

UPGRADING your skills base, rather than relying on profit-related pay, may be the best route to a better salary, according to a new survey. And individually-judged performance-related pay (IPRP) is set to become the most popular incentive for employees.

While the chance to earn more money at the same time as engaging in self-improvement is pushing employees to be more productive - thereby benefiting employers - there is less enthusiasm from staff for profit- related pay, which is perceived as beyond the control of individuals.

Team-based pay, which has a binding effect within companies, was slightly more popular. But skills-based pay was voted the most powerful motivator in the survey by the Institute of Personnel and Development (IPD), which questioned more than 1,150 organisations, comprising 1.5 million employees.

Contrary to received opinion, proft-related pay (PRP) was revealed as a growing trend among companies, but private sector firms prefer to use the scheme more than their counterparts in the public sector. The results were discussed this week at the IPD's ninth annual compensation conference; among the speakers were Dr Ray Richardson, senior lecturer at the LSE, and Maggi Coil, chair of the American Compensation Association.

IPD policy adviser Oonagh Ryden was surprised at the continuing prevalence of PRP. The survey found that 40 per cent of managers and 25 per cent of non-management employees were on some kind of PRP scheme. "We thought maybe people were moving away from it, but the whole idea remains, although people are tweaking their systems and adapting them to fit different organisational cultures and aims."

IPRP, particularly that based on skills and competencies, works best during appraisal when employees are able to ask for what they would really like, says Ms Ryden. "People like the concept because it's fair, but it has a tendency to fall down in its implementation, and because it's quite difficult to assess."

Favouritism and lack of formal evaluation were two of the problems. But the main issue with any kind of PRP, the survey found, was that rewards are often so minimal that they are often ignored. The average value was the equivalent of two weeks' salary, and nearly three-quarters of organisations said awards were too small to act as a motivator."With pay freezes in the public sector, it works out as a small percentage. It is often enforced, rather than employees bringing it about themselves," says Ms Ryden.

This could be one of the reasons why 17 per cent of public sector companies are considering abandoning their PRP schemes for management employees. Conversely, there may be a swing towards introducing US-style "at risk" payments instead of year-on-year increases, which employees often regard as their entitlement.

The survey found that high achievers benefit most from PRP, particularly when given the chance to expand their skills and - as a corollary - their own employability. "Canny employees will be those that go for everything," Ms Ryden said.

A full report of the survey's findings, will be available in May. For more information, contact the IPD on 0181 263 3240.