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The Tax Payers Alliance recently criticised the treatment of bonuses by the Home Office, which had set aside 8.6% of its pay bill for such payments but was planning to use only 4.4%.

TPA argued cutting the pot for bonuses was not the same as cutting pay, suggesting that civil servants were being paid bonuses they had not earned.

It also commented bonuses would have been paid if there had been enough money to pay for them. Clearly it thinks bonuses shouldn’t apply to public servants.

MP for Cannock Chase, Aidan Burley, TPA said “Surely a bonus is not compulsory…If you’re not performing and therefore not entitled to a bonus, that doesn’t count as a pay cut.” “Quite right.” said TPA and it must be correct that bonuses shouldn’t be taken for granted – period!

But it’s hard to accept suggestions the civil service has an inappropriate bonus culture in the face of practice elsewhere. Paying enormous bonuses to company CEOs and bankers remains commonplace – irrespective of the global performance of their organisations. To be fair, TPA did report these cases but didn’t comment with the same degree of disdain …. despite many bankers bonuses being underpinned by taxpayers financial support.

In the private sector it is argued bonuses reflect success in parts of the business and for personal contributions that have been strong. Reward and recognition are needed to retain the best people it is said. Isn’t it equally important to keep the best public servants so we have positive outcomes and good value for money for taxpayers?

While the Telegraph reported the story in the context of David Cameron’s vow to crack down on ‘crazy’ bonuses, for the majority of public servants, and all low paid employees in both public and private sectors, the annual bonus can be really significant – though it probably doesn’t stretch to pay for “yet another sports car”. Distinguishing “pay” from “bonus” is pretty meaningless when it comes to employers’ costs or people’s spending power and anyone taking home less this year than last experiences a real terms cut in earnings.

Is it fair to suggest bonuses in the civil service are different from those in the private sector?

Many civil service bonuses are paid as “non-consolidated performance payments” – which means money at the top end of the payscale has to be re-earned each year by deomonstrating continuing exceptional performance. Exployees who don’t repeatedly meet or exceed objectives don’t get the payments.

Normal “pay maxima” at the top end of the pay scales have been limited to ensure more pay is performance-related. By replacing purely incremental pay systems, organisations have stopped poor performers receiving the same pay levels as people who “earn” more. The systems also ensure the level of bonus, and cost to the taxpayer, is ultimately in the control of the employer – so the TPA criticism is unjustified.

The Public and Commercial Services Union have provided interesting evidence of the broad switch to bonus payments for senior staff, and their stance is understandably negative. They have expressed their opposition to performance pay because of inequities in the performance appraisal system which underpins it.

With all performance related pay systems there can be difficulties setting appropriately stretching objectives – so that people don’t earn their money too easily … a criticism of executuve bonuses as well as those in the publuc sector.

Looking back at the Home Office situation, those employees who have been performing well – in relation to the objectives they were set – will have expected to earn their bonus in the same way people working extra hours expect to earn overtime pay – that’s was the deal they entered into.

Many have called for further extensions of performance pay in the public sector – to spur improved performance. If using these mechanisms simply draws criticism, and organisation slash the budgets for them, it’s hard to see why people would consider bonuses when deciding how much effort to put in to deliver performance.

All pay systems will exhibit potential anomalies …. organisations have to choose systems that broadly suit their environment and culture, paying attention to manage the problem situation carefully.

In all discussions about pay, its important to remember that money and bonuses generally are not the best way to motivate people to work smarter or harder. Good leadership and management is always far more effective in the long term.

How do you use bonuses in your organisation?

What is your experience of public sector bonus payments?