Overtime – who should get it?

Today the TUC report that the amount of paid overtime has fallen significantly over the last year. This is not surprising given the depth of the recession. Much of the reduction will have come from reduced output; especially in manufacturing; some will have come from organisations where overtime was reduced to save jobs. Countering this will be situations where job losses result in essential overtime for those remaining.

The working population falls into two groups. Those for whom paid overtime is a regular part of life and those whose monthly pay rarely differs from their basic salary divided by 12. Overtime is a valuable management tool for flexing costs in situations where attendance equals output (manufacturing) or where attendance is a necessity (counter or call centre staff). However, there is a grey area, particularly for office-based jobs, where output is not quantified and allocation of time is down to the individual.

Much administrative and managerial work requires social interaction as well as form-filling and decision-making. The HR Officer who never asks staff how they feel about their work or discuses last night’s football will be seen as aloof and will not understand employee attitudes as they should. But when, at the end of the day, they have to stay on to complete a promised report are they working legitimate overtime or did they spend too long discussing last night’s match? Did they choose the wrong priorities for that day’s many tasks?

Common practice, and the law, require specified hours work but there are many jobs where a day at work may not always equal a day’s work.

Top of the heap – public sector pay

Today’s Times has an article on the topic of whether any public servant should be paid more than the Prime Minister. It is a two-part article with one writer arguing the case against, another the case for. The question, of course, arises from the fact that quite a lot of them already do.

Once you start debating senior pay in this way, and in public, you end up with all sorts of highly emotive but inappropriate comparisons. Just how many nurses is the Prime Minister worth? How many times the minimum wage should the person running your local council be paid? Once you go down this route you inevitably end up with truncated salary structures, and much bickering.

The salaries paid to public sector chief executives (local government, the NHS, quangos, etc.) should, as in all sectors, be based on: the skills and experience needed; what is paid for such people elsewhere; and the difficulty, or otherwise, of attracting good candidates. Whether or not you think the correct answer has been arrived at for these executives you have to admit that the third part of the test, the ease of finding candidates, goes out of the window if you make the PM’s salary the yardstick. At the very least there are the 300+ MPs who would love to reverse their initials; possibly even take a pay cut for the privilege.

MoD bonuses – why the fuss?

Much heat and great indignation in the media today as it becomes known that the MoD (an arm of government that has overtaken the Child Support Agency in the public ordure stakes) is paying £47m in bonuses to its staff. Most of the critics seem not to understand the nature of this scheme. Essentially it uses a pot of money (possibly around 3% of payroll) accumulated by withholding small amounts from earlier pay reviews. It is distributed among staff as a non-consolidated payment based on annual appraisal ratings (it looks as though around two thirds of staff shared the pot). As it is not consolidated into basic, contractual pay it is not an addition to the annual paybill. It should be similar in amount to what was paid in previous years – just (potentially) distributed differently each year.

Appraisals – tasks or traits

I recently came across an organisation that would quite like to vary an element of pay to reflect individuals’ performance but felt that they should not do so because their appraisal system was not appropriate. In fact the system did produce a rating (an essential element for linkage) but was based on ‘soft’ factors such as behaviours and values rather than performance against annual targets. They thought this ruled out using the appraisal ratings to moderate pay or calculate bonuses.

Increasingly, organisations are assessing performance against such characteristics because they think this will better drive long-term performance. That is fine but then be consistent and accept them as a valid measure of performance. If the definitions of the softer factors are such that people can score highly against them while performing their duties badly you have the wrong definitions. Change them or appraise against task performance.

The appraisal should be an employee’s main source of formal feedback about their performance – the annual stock take. If major elements of working life such as pay (and, possibly, promotion) appear to be based on factors unrelated to those discussed at appraisal time why should they take the appraisal seriously?

Publish and be damned – local government pay

I read that the Government is proposing the remuneration of senior local council employees be published in the annual accounts. The intention is that “…. this will put a brake on spiralling pay packets and perks” (John Healey: Local Government minister). Well, I wonder. I suspect the law of unexpected consequences will have something to say about that.

The idea that publishing the fact that Council Chief Executives can get more than the Prime Minister will generate an unstoppable public backlash, or shame them into accepting less, is optimistic at best. Highlighting the differences in senior salaries between councils is just as likely to result in claims from those in the less ‘generous’ authorities as restraint among the ‘fat cats’.

Salary benchmarking is the basis of all good reward practice but, once you have the data, it must be moderated by a whole range of specific factors such as the true demands of the posts, the quality of the individuals and affordability. When the jobs in question are your most senior executive ones there is a natural tendency to overestimate the demands, avoid facing down the individuals and, as the salaries represent a small percentage of overall costs, play down the cost issues.  Local authorities are probably more susceptible to these tendencies than many other organisations.

Reward & recession

To a CIPD reward forum this week on the topic of “Rewarding in a Recession”. The scene was set by John Philpott of the CIPD with a number of highly depressing going-downhill graphs followed by general advice on how to get value for your non-pay benefits from Mark Eaton of Personal Group. Chris Johnson of Mercer then gave an all-round view of what is happening in larger companies. I will post some more detailed comments at another date but here are four key points that I brought away with me.

‘Crunched’ – pay & reward in the recession

I have just booked for a seminar that will consider the role of reward practices during the recession. It promises to focus on working out how much you are really spending and how to get maximum ‘bang for your buck’. I look forward to posting some comments after the meeting. The attendance at these seminars tends to be a mix of people from public, private and not-for-profit organisations (plus consultants, of course) and it will be interesting to find how these different sectors are reacting to the new economic environment.

It will also be interesting to see how much things have moved on by the end of March, when the seminar will be held. I have the feeling that, in some sectors, realisation that there will not be much money to go round is dawning only slowly. One straw in the wind is a survey by Smith & Williamson. Back in the summer they surveyed housing associations and, among their findings, was the expectation that 2009 salary increases would average 3.5%. At the end of January they, very sensibly, undertook a quick update by email and found the average expected increase had dropped to 2.5%. Will it even be at that level by April 1^st (a typical pay review date in this sector)?

Can I go home now please – unpaid hours

The TUC ushered in the New Year with its annual protest that vast numbers of employees in the UK do obscene amounts of unpaid overtime. More than five million people, they report, worked unpaid overtime in 2008, bringing its total value across the UK to a record £26.9 billion: according to an analysis of official statistics published by the TUC. The figures, which only count overtime of more than one hour in a week, show that the average amount of extra time for these 5.24 million people is seven hours six minutes. That is, very roughly, 20% of the working population, which I think is low. Probably because the rise in extended hours operations (shops and call centres, for example) means more of us are in rostered jobs where overtime is much more likely to be paid automatically.

The TUC implies that these figures reflect downtrodden workers who stay late for fear of losing their jobs. But is that always the case? If you stay until six because you had not finished at five-thirty have you given your employer an extra half-hour or did you under-deliver earlier in the day because of an extended business debate about last night’s Eastenders? Or were you simply feeling a bit lethargic and took longer than you should have over various tasks. Of course, there are no official statistics of those who are a few minutes late in the mornings or come back late from lunch.

Nobody condones organisations where staff are pressured into staying late but the danger of focusing on unpaid overtime is that it reinforces the negative view that you are paid for your time rather you’re your output or contribution.

Nobody really knows

A poll of 540 private sector employers by Industrial Relations Services (IRS) has found that the median forecasted pay rise for 2009 was 3.5%. This is the same figure as the corresponding survey found last year. Will that really be what happens in the private sector over the up-coming pay round? Was the survey taken just ahead of the time when the full horror of the World’s financial problems came to light? Do they think that retaining key staff will still be the critical factor even though any sensible employee will stay where they are for the next few months (years?)? Will they really be able to pass on cost increases?

In practice, I do not think anyone in the private sector really knows what commercial and salary pressures there will be when this season’s pay review comes around.

What (starting) price your bonus next year?

Employee benefits magazine reports that BT is planning to offer its top 400 top-level employees (in some businesses) the chance of gambling a minimum of 10% and a maximum of 50% of their contractual rewards in return for the chance of additional bonus. If they meet targets they get their ‘stake’ back. Beyond that they can get up to 200% of the amount gambled on a sliding scale. Obviously, for this to work, BT has to be confident of its target-setting processes and the staff be confident of their abilities (or believe that the targets are somewhat soft).

We do not know how many will take this offer up or how many will risk the full 50%. Many fewer, I suspect, than might have been the case when the scheme was being devised (ie, before the financial world imploded). But it is interesting to think how this might be applied in other areas. MP’s invited to gamble part of their salary, or gold-plated pension, on increasing their majority? Newspaper editors gambling theirs against reducing the number of retractions they have to publish? Bloggers gambling on increasing the number of hits? Maybe we should forget that last one.