Law Donut blog

Pay and bonuses

The ‘old world’ of pay and benefits systems has led us to a place that does not seem very comfortable. There is still consistent underpayment of women.

Massive equal pay claims are expected to imperil sections of the public sector and lead to cuts in services. Bonus schemes have rewarded individuals who bankrupted their company (and, in some cases, the country). An industry of job evaluation has been established as a defensive necessity for employers, but many employees still feel a burning sense of unfairness about their pay.

What are we trying to achieve? The legal context is perilously limited as a starting place, as it is simply concerned with eliminating oppressively small wages (with National Minimum Wage), and manifest discrimination on the ‘equality’ grounds. But there is little legal imperative to “fair” pay, once the hurdle of unlawfully discriminatory differentials is overcome.

It may be lawful to single out workers who do not have the benefit of specific legal protections, but it will tend to undermine feelings of fairness. For example, those who never take ‘sickies’ are functionally working harder than those who do. They may argue they are being ‘discriminated against’ if they are salaried, since they work more hours for the same pay.

They may have no legal redress, but is your organisation paying the price some other way? Workers can use subterfuge to restore a sense of ‘equity’ if they feel they are being unfairly treated, but this is never to the employer’s benefit. Minimum and hourly wage structures tend to reward work by the hour, but perhaps the reality of the new world of work is to be found in piecework rates. This may be a useful approach for some jobs, but for many it is not easy to measure the “piece”.

You could argue that if I am twice as productive, I should I get twice the hourly rate. But if the organisation has not established a clear expression of “value” in the jobs, and a way of measuring outputs, then what constitutes ‘productive’ will not be clear and reward structures will be adrift. Bonus schemes come in a wonderful variety of shapes and sizes, but what is a bit startling is the number that seem to reward undesirable behaviour or outcomes.

Some schemes focus on individual achievement, and although some competition between members of a workgroup can help to get everyone to up their game, sometimes the outcome is corrosive not productive. And so many bonus schemes appear to result in women being paid substantially less. There is no reason why we should not arrive at individual bonus schemes that are gender neutral and encourage the type of performance the business needs, but many fail to do that. Structuring short term and long term reward systems is becoming trickier.

Pension funding is becoming ever more difficult, so are employees going to need two jobs to earn enough to fund daily life and save for a pension? Existing working time maxima apply on a ‘per job’ basis (except for the under 18s), so two jobs may be a way for some workers to earn enough. But this raises questions about the long term health implications for the workers, and quality implications for the organisation’s customers. The European law-making process seems determined to regulate and control and reduce variation, in the interests of protecting workers from exploitation. At what point, though, is a worker being protected not from exploitation, but from work itself?