The problem with pay flexibility: changing pay practices in the UK health sector

Abstract

This paper critically assesses models and policies of pay flexibility as applied to the public sector. Examination of the arguments for greater pay flexibility across three dimensions - external labour market flexibility, organizational flexibility, and macroeconomic flexibility - reveals a number of weaknesses, rooted in a failure to problematize the conflicting motives for greater pay flexibility in the context of pressures internal and external to the organization. An alternative 'model' of changing pay systems is developed and applied to the case of the UK health sector where there have been attempts to introduce various forms of flexible local pay arrangements. Drawing on interviews conducted during the mid-1990s with personnel and HRM managers at fifteen NHS Trusts, a number of issues are examined, such as: the impact of differential external labour market conditions of workers on the development of strategies designed to tie local pay to improved performance; the introduction of performance-related pay as a means to institutionalize wider earnings differentials within the organization; and the potential conflict between pressures to link local pay structures with local labour market conditions, on the one hand, and customary employee-held norms that link pay to occupational skills and professional status, on the other.

Keywords:

• Pay Flexibility
• Public Sector
• Performance-RELATED Pay
• Health Sector