arp
In recent years there has been increasing interest in both the public and private sectors in pay arrangements which tie rewards more closely to performance. However, developing an effective appraisal related pay (ARP) scheme is not easy. Consequently, this booklet is designed to:
• discuss the benefits and difficulties associated with ARP schemes
• give guidance on key factors to consider when introducing ARP
• offer general guidance on how to assess performance and relate the outcome to pay
• give advice on how to manage certain aspects of ARP schemes.
The booklet is concerned solely with payment systems where increases in pay are wholly or partially based on the systematic assessment of performance through individual appraisal, rather than with work-measured or productivity-based systems such as payment by results or piece work, or with profit sharing schemes. The focus is on good practice, and the booklet should be read in conjunction with another Acas Advisory Booklet: Employee Appraisal. A brief outline of some other common methods of rewarding performance is given in Appendix 2.
There are no off the peg ARP schemes; they should be designed to suit the individual needs of organisations and introduced only where the existing payment system is sound. Employees must be clear about the aim of the scheme and understand how it will operate. Once introduced, schemes should be regularly evaluated to ensure that they continue to be relevant and meet their objectives.
Introducing appraisal related pay
--------------------------------------------------------------------------------
Key Points: –
Appraisal related pay:
Emphasises the importance of effective job performance
Can help to target resources more effectively
May help to retain and motivate employees
Should be based on an effective payment system
Should be appropriate to an organisation and introduced only if the aim is to improve performance
Should be based on objective and properly measured criteria
--------------------------------------------------------------------------------
What is appraisal related pay?
Appraisal related pay (ARP) is a method of payment where an individual employee receives increases in pay based wholly or partly on the regular and systematic assessment of job performance.
Why introduce ARP?
It is argued that appraisal related pay, in the right context, can be of potential benefit to both employers and employees. It can, for example, help employers improve the efficiency and effectiveness of their workforce by emphasising the need for high standards of job performance. It is further argued that it can offer the flexibility to help motivate and retain valuable employees by targeting higher pay at better performers. Employees in turn may welcome a system which rewards extra effort by extra pay. The introduction or revision of ARP is often linked with other changes in pay administration and personnel policies, including:
• greater decentralisation of the responsibility for pay determination
• the introduction or extension of appraisal schemes
• moves towards harmonised terms and conditions of employment for blue and white collar workers
• the greater use of flexible remuneration arrangements, for example in skills acquisition whereby some organisations award pay increases to employees who undergo and successfully complete training modules.
Despite similarities in the reasons for introducing ARP, there are considerable differences in [next page]