Right on the money. What do Australian unions think of performance‐related pay?
| Pages | 141-159 |
| Date | 01 April 2005 |
| DOI | https://doi.org/10.1108/01425450510572676 |
| Published date | 01 April 2005 |
| Author | Glennis Hanley,Loan Nguyen |
| Subject Matter | HR & organizational behaviour |
Right on the money
What do Australian unions think of
performance-related pay?
Glennis Hanley
Monash University, Victoria, Australia, and
Loan Nguyen
St. Albans, Australia
Abstract
Purpose – The diffusion of performance related pay has attracted considerable academic attention
over the past decade. While much contemporary debate has focussed on the excesses of executive
remuneration at the “big end of town”, what is not so prominent are the views of unions representing
employees at the other end of the remuneration spectrum: this is the purpose of this paper.
Design/methodology/approach – Evidence was gathered at two levels using two sets of research
instruments: in-depth interviews with senior union officials, and primary documentation analysis with
specific reference to performance appraisal and performance-related pay clauses in union Enterprise
Bargaining Agreements.
Findings – Document analysis reveals that performance appraisal and performance-related pay
clauses range from mere stipulation of existence to detailed processes and principles of design and
implementation. Specific clauses in the white-collar unions’ agreements suggest that they are not
totally opposed. However, the lack of performance appraisal and performance-related pay clauses in
the blue-collar unions’ agreements illustrate their propensity to restrict pay increases to a job
classification structure. Although there were clauses that aimed to ensure a performance-oriented
culture, their agreements seem to be mere sentiments. Overall, only one union supports the notion of
performance related pay; the others find performance appraisals difficult to embrace. Negative
experiences and consequent problems lead them to argue that the process is complicated and usually
puts workers at a disadvantage.
Originality/value – Strands of different explanations account for union opposition, but the principal
issue is that performance appraisal has only an evaluative function, that is to link performance to pay.
To minimise problems in shaping PRP schemes, the unions advocated the integration of a social
dimension; transparency and equality.
Keywords Performance related pay, Performanceappraisal, Australia, Trade unions
Paper type Research paper
Introduction
Events of recent years – globalisa tion, economic uncertainty, and technological change
have placed pressure on organisations to streamline their performance and become
more flexible and adaptive. In recognition of these imperatives the management of
employee performance has assumed a high importance and organisations are placing
increased emphasis on performance-based remuneration. As a consequence,
performance related pay (PRP) is an entrenched part of the compensation system.
The diffusion of PRP has attracted considerable academic attention over the past
decade, especially concerning the impact of the American business system on human
resource (HR) practices and HR innovation in areas such as high commitment work
systems, productivity bargaining, and PRP (Almond et al., 2003; Edwards and Ferner,
The Emerald Research Register for this journal is available at The current issue and full text archive of this journal is available at
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Performance-
related pay
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Employee Relations
Vol. 27 No. 2, 2005
pp. 141-159
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DOI 10.1108/01425450510572676
2002; Ferner and Quintanilla, 1998; Gunnigle et al., 1998). At the same time it is
worthwhile considering that enthusiasm for PRP is cyclical; it was seen as the an swer
to increase productivity in the 1920 s, 1950 s, and 1960 s. And since the 1990 s, PRP has
staged a revival as a “new idea” in connection with workplace reform and enterprise
bargaining (Issac, 2001). While a number of writers (Schuster and Zingheim, 1992;
O’Neill, 1995a, 1995b) propose that the contemporary focus on aligning a reward
strategy with corporate objectives is essentially different from the traditionally
administered ad hoc incentive schemes of the 1960 s, the logic behind PRP is timeless:
spread wages according to performance linked to an organisation’s objectives.
Comparative analyses of the evolution of industrial corporations such as that by
Chandler (1990) helped shape our views on managerial capitalism. Much contemporary
debate has focussed on the excesses of executive remuneration at the “big end of town”.
What is not so prominent, however, are the views of unions representing employees at
the other end of the remuneration spectrum. Unions and PRP are well-established
institutions in the Australian labour market. As Booth and Francesconi (2000, p. 1) put
it: the first institution reflects the old notion of “collectivism” in industrial relations,
while the second reflects “individualism” in the employment relationship, allowing
individual remuneration to be tailored to individual performance. The purpose of this
paper is to provide an Australian perspective of performance appraisal [PA] and PRP
by examining the views of a cross-section of federally registered white and blue-collar
unions representing several hundred thousand employees. This paper is structured as
follows. It begins with an overview of the principles of pay and performance. Following
this, PRP is placed in an Australian context. The second section provides a breakdown
of PA and PRP clauses in the participating unions’ enterprise bargaining agreements.
This is followed by analyses of the unions’ perspectives on PA and PRP. The third
section presents their views on what constitutes an effective PRP system. The paper
concludes with a consideration of the implications of our findings for unions and
organisations.
Pay and performance
PA is a common way of connecting an individual’s performance to PRP. It is centred on
the premise that rewards such as pay, should be contingent on some measure of an
individual’s performance in their job (Gunnigle et al., 2003, p. 19) Performance can be
measured via quantitative and qualitative criteria. When quantitative criteria are used,
part of an individual’s pay is linked to production (or service) performance, the
organisation’s financial results or the attainment of broader business targets. When
qualitative criteria are used an individual’s pay is related to aspects of performance
that cannot be gauged in terms of productivity, such as qualifications or “attitude”
(Eironline, 2002). A considerable amount of research has been directed toward PA and
PRP. This literature forms the basis of the following discussion.
PA and its frequent link to PRP is a contentious practice in the management of
employee performance, for reasons which warrant some discussion. PA can be distil led
into two main purposes: evaluative and developmental. The first involves the
measurement and comparison of an employee’s performance to justify a range of
human resource decisions relating to remuneration, promotion and sometimes
termination. Possibly because of its very nature, for some individuals PA is a
threatening experience clouded by perceptions of subjective evaluation and unfairness.
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