The New Pay — Losing Sight of Reality?

The growth of more contingent pay systems has been a key development in the 1980s and 1990s. Various contextual changes — such as the pattern of employment, the decline of collective bargaining and Government support for particular initiatives to encourage financial participation — has given employers an increasing freedom in determining both the composition and level of remuneration (Brown and Walsh, 1994). This new freedom has allowed new pay systems to develop which are, according to the prescriptive literature, much more contingent on individual business circumstances than in the past (Armstrong and Murlis, 1994; Schuster and Zingheim, 1992). Pay determination has become increasingly linked to the performance of the individual company or business unit, the team or work group and, of course, the individual employee. Concepts such as the “going rate”, the “rate for the job” and pay comparability have been challenged and, in some cases, replaced with new approaches to pay determination. These new approaches include “person related pay”, as opposed to “job related” (Mahoney, 1989; Gomez‐Meja and Balkin, 1992); more decentralised pay determination systems (Millward et al, 1990; Jackson, Leopold and Tuck, 1993); more “variable” or “at risk” pay (CBI, 1994i); and more flexible benefits schemes (IDS, 1991). Most importantly, the concept of “reward strategy” has emerged, the clear linkage of remuneration systems to business objectives and company culture (Hewitt Associates, 1991; Murlis and Armstrong, 1994; Gomez Meja and Balkin, 1992). A recent CBI/Wyatt publication on “Variable Pay” (CBI, 1994) concludes that employers are looking for payment strategies based around three criteria: