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The bonus pot for bankers has returned to the normal level according to the Centre for Economics and Business Research (CEBR) at £7bn (compared to £11bn in 2009).

For 2010, the government will take a larger slice of the bonus cake than bankers after the introduction of a 50% tax rate for income over £150,000.

With the backdrop of the current crisis, it is “bankers” who are facing the heaviest criticism from the public, not public servants or senior managers.

With people feeling they are being made to pay for the mistakes of bankers, it is the high bonuses being paid there which annoys people most.

Attractor has examined the issues surrounding high earnings in particular sectors before. In the past we have looked at the pay of top managers, performance pay for public servants, bonuses in public services, top public servants and public services generally. So what about bankers? Read the rest of this entry →

When Network Rail announced its bonus payments in June 2010, there was widespread condemnation of the reward of it’s senior managers. The Office of the Rail Regulator (ORR) had expressed some criticism of Network Rail in relation to train punctuality and employee safety describing results as “mixed”, warning that bonus payments should reflect performance.

Pre-tax profits were down from £1.52bn to £395m for the last year, reflecting asset revaluations, a drop in revenue and higher network investment.

With these mixed results, the proposed bonus pot of £2.35m was criticised by government spokesmen though shareholders eventually supported the payments.

Perhaps unsurprisingly, the Tax Payers Alliance expressed its outrage that a private sector organisation providing public services (TPA used the phrase “technically being a private company”) should make significant bonus payments to its top staff “… one hundred per cent of which is being paid by you, the taxpayer.” TPA accused the government of ‘weak-words’ on the matter.

In the end however, we must recognise an earlier government decided to place control of the rail network at arms length in a private body, further away in fact than many banks are currently. In the long run this is most likely to be in the long term interest of rail services and the general public. But can big bonusus be justified? Read the rest of this entry →

Photo: Material Boy, Flickr

The Chartered Institute of Personnel and Development (CIPD) has recommended wider use of performance-related pay in the public sector while Personnel Today’s “Austerity Panel” has rejected this as a technique for improving productivity.

Yet when the government has used performance-related pay and bonuses as an incentive for public sector workers, it has faced criticism. Writers at the Tax Payers Alliance appear to consider public sector workers unworthy of reward for performance!

Personnel Today quoted Graham White, HR Director of Westminster Council and Roger Seifert, Professor of Industrial Relations and HR management at Wolverhampton Business School as contradicting the CIPD’s suggestions – highlighting the difficulties and distorting impact of performance pay.

So what evidence is there on successful use of performance pay in the public sector? Read the rest of this entry →

Photo: HowardLake, Flickr

The NHS White Paper allows individual employers the freedom to determine pay for their own staff. While this is a relatively small provision in the paper, it has potentially serious implications.

Quickly spotting this and commenting in the Public Finance blog, Duncan Brown has expressed serious reservations about the potential for a major deconstruction of the national pay framework Agenda for Change.

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? Read the rest of this entry →