I read this article at the weekend by Will Hutton talking about his work on public sector pay.  I had a meeting with Will a few weeks ago, alongside with a couple of other private sector HR people, to discuss the issues of fairness in pay and particularly the use of performance related pay in his work for the coalition government.

Unlike the comic stereotypes that get bandied around in the press, the general consensus was that the Government should not look to performance related pay as the silver bullet that would solve all of the ills.  And that is certainly shouldn’t be a replacement for a living wage.  At the end of the session I made the point that you couldn’t look at pay structures in isolation.  That pay only becomes a media topic, when people feel it doesn’t equate to worth.

There was hardly ever any discussion of Sir Terry Leahy’s remuneration, although it was of a magnitude that a cashier or shelf stacker would find hard to imagine, but what about Andy Hornby?   No-one would discuss the level of financial reward that Sir Alex Ferguson receives, but compare that to their reaction to Fabio Capello?

People will accept top people being paid good money, even in the public sector, if they can see it is justified

Perhaps unsurprisingly then, Will’s comments really resonate with me.  Levels of pay in the public and private sector are sensitive issues, but only when they feel out of proportion to the experience of the end-user.  But of course that is easier to do in some circumstances than others, a Head Teacher’s pay could be linked to the performance of a school and that would be visible and arguable to the public. But would that be as easy for the Head of the Environment Agency?

Will’s conclusion is a bonus-malus system could and should be introduced for certain senior roles. It is brave thinking and likely to be hugely unpopular with those senior individuals and the management associations, but constructed properly it could go a long way to convincing a sceptical public that reward is earned. 

Every small business person knows that if they do well they get the benefits, but if they don’t it hits them directly in the pocket.  As a principle, that can’t be bad.