What is 'The New Pay'?

Professor Stephen J. Perkins offers reflections on designing and carrying out empirical research in the reward management field of inquiry. Reflections informed by experience leading the team researching and writing the CIPD’s fourteenth reward survey, published in December 2017.

The third edition of our volume Reward Management: Alternatives, Consequences and Contexts aims to support people seeking to develop the skills necessary to engage critically with the field of reward management and its place in strategic management and good governance practice across private, public and third sectors of the economy.

We hope to encourage users of our textbook to do some reward management research exploring the controversies and challenges taxing policy makers, managers and other stakeholders in the effective operation of organizations where people are purposefully employed. See the final section of the report for a summary of conceptual and practical issues that arise.

The annual survey’s headline findings were introduced earlier in the same month to participants attending the European Association for Advanced Studies in Management’s sixth biennial reward management conference, whose core theme was to appraise outcomes from almost 30 years’ worth of claims by advocates for ‘The New Pay’.

New Pay

As discussed in the book, ‘The New Pay’ is an approach to focusing investment in employee reward, which can be located in the ‘best practice’ (or ‘normative’) tradition of thinking. This can be contrasted with a ‘contingency’ approach – matching decisions to the circumstances of institutions and people – and attempts to adopt what has been termed a ‘configurational’ perspective. That approach emphasises ensuring that – with lots of moving parts involved in the employment relationship – those designing and administering reward management remain actively aware of the ‘open systems’ characterising all levels of an economy. We address this ‘systems thinking’ in the book, raising awareness of the way that, while the employment relationship is indeterminate (there is no algorithm for programming its outcomes), there is an interplay of forces and interests that seek to regulate it.

Irrespective of overall merits, New Pay thinking highlights that reward management is of strategic importance to all organisations; that it is a highly visible medium through which to communicate organisational values and priorities when seeking a return on investment in employing people. Where claims need particular testing is in relation to the proposition that ‘base’ pay (salary, wages) should focus on recognising the potential value an employee may contribute to an employer, whereas variable pay (commissions, bonuses, profit and other forms of ‘sharing’ plans) should recognise outcomes from the application of employee knowledge and effort. And that together these fixed and variable elements should act as an incentive to attract, retain and motivate high performance among the kinds of workforce members an employer requires to realise corporate strategic goals.

Research Focus

An important lesson in approaching research of any kind, reliant on securing a reasonable response rate, to inform the analysis of the variables under investigation, is focus. This enables clarity on what contribution the research hopes to make, whether to theory and/or practical knowledge. It also helps keep data collection manageable, and it is hoped avoids confusing those whose insights are being collected to inform the analysis from which findings are to be distilled.

After a year in which the CIPD’s surveys unit, following a wide-ranging consultation across the user community, weighed the future of research in this and other HRM areas, an important decision was that for 2017 and thereafter a ‘focus’ principle would apply. After several survey cycles in which the question was tested as to whether or not business strategies and reward management strategies could be discerned from working in alignment, the new direction was to rationalise. But to do so without sacrificing quality of data and rigour of analysis.

The consultation produced significant support voiced across the user base for the future of the survey series. To balance the various priorities the conclusion was to augment data to help practitioners have access to benchmarked practice with an assessment of some key questions to inform practice, currently attracting a lot of attention. For 2017, the focus has been on pay – and associated questions around the influences on managerial practices for structuring pay setting and progression; on questions around the justness of outcomes, including the gender pay gap and pay reporting transparency); and to probe the extent to which some claims of radical changes to performance and pay management apply in reported practice.

With a sample of well over 700 respondents, representative of all sizes and sectors of organisation across the UK, the survey has been well-placed to add to users’ understanding in each of these areas. For 2018, the focus shifts to undertake an assessment of how non-pay benefits (sometimes classified as fringe benefits and/or perquisites) are organised and administered, looking across broadly the same respondent population. Do stay tuned!