arp
in the way in which employers seek to modify payment systems to take account of pay for individual performance. The more common approaches are to:
• replace part or, occasionally, all of general pay increases with ARP awards
• strengthen the link between pay and performance by introducing additional payments above the scale maximum to recognise high performance
• introduce ARP in place of incremental pay increases based on service, age or qualifications.
Who should receive ARP?
Employers of very different sizes have introduced or are actively considering the introduction of ARP. Although more commonly found in larger organisations, smaller firms are also considering its appropriateness. Furthermore, it has been introduced by public bodies and is not confined to the private sector.
However, as ARP schemes can be time-consuming to implement and manage and can involve a substantial change to an organisation’s culture, they are often restricted initially to a particular group of employees (usually senior management) before consideration is given to extending them to other parts of the workforce. Such a gradual approach has certain advantages:
• senior managers need to be committed to achieving improved performance from their employees. Experiencing a scheme at first hand will help to foster such commitment
• restricting ARP to specific groups of workers allows an opportunity to test whether the scheme is appropriate, meets its objectives and contains sufficient safeguards to be fair.
It is important to establish that such an approach will be acceptable since restricting ARP in this way could lead to the charge that some employees are being treated more favourably than others. However, if the scheme has proved effective with the pilot group, it can then be introduced for other employees, or for the majority, and will be more likely to prove equally effective.
When should ARP be introduced?
Before introducing ARP, employers should consider whether it will be appropriate to their organisation and clarify their objectives. An ARP scheme should be introduced only if the primary reason is to improve performance. Employers should consider whether any change is needed in the existing payment system by measuring it against certain criteria:
• is it fair?
• does it enable the organisation to recruit and retain on equal terms in the labour market?
• does it accommodate change?
• does it measure performance adequately?
• does it motivate employees?
• does it encourage productivity?
• is it controllable?
ARP should be based on the foundation of a sound payment system and accepted salary levels. It should not be introduced if what is really required is a general increase in wage rates – ARP is not an effective substitute for adequate basic rates of pay. Another method of improving the payment system is to redesign the payment structure and re-evaluate job gradings. Some employers may find that introducing appraisals and setting systematic and achievable objectives improves the performance of the majority without the additional incentive of an element of pay.
ARP ought not be introduced as a ‘market supplement’ payment to retain certain groups of employees. Any scheme is likely to [next page]