Implications of a performance pay system


Human resource and industrial relations is viewed by many scholars as themes that see the sights of thoughts that relates to employment relationships in many organizations including teaching institutions in Australia. The issue of performance in these institutions is of interest to nearly every one in the country and much has been centred on improving the results of the students that are in these institutions. Over the past few years, teachers have been under pressure to produce best results in Australia and this development has led to introducing performance/merit pay system. (Williams and Adam, 2006)

There is an argument that some or all a worker’s pay is ‘contingent’ that is it only gets paid if the worker meets certain benchmarks. This means that teachers in learning institutions are required to beat specific targets in order to be compensated. The teachers will be compensated for the extra work that they have done and more specifically if their students have performed best in their studies. Research indicates that the Australian teachers with superior degrees and additional years of experience are remunerated extra than those employed recently or those with low educational levels and terms of service are just a manifestation of age and persistence. This system is founded on the supposition that compensating teachers for outstanding performance would offer encouragements for enhanced student accomplishment gains in their studies. (Williams and Adam, 2006)

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This practice of performance pay in Australia has led to unions of teachers being argumentative that the assessment is prejudiced and it is not based on intended statistics. These performance pay systems often provides for additional payments to that of the teachers salaries and has led to economic complexities because more funds are required to be used for the payments.  This system of merit/performance pay has another bad implication to the teachers in that there are under enhanced strain and force to produce good results from their students in the learning institutions within Australia. This pressure in turn leads to low motivation of teachers which may affect the student’s performance in long-term when the teachers involved will feel that they have achieved enough in terms of gaining financial resources associated with student’s performance. (Hagglund and Provis 1996)

The Industrial Relation perspective

The performance/merit pay systems in Australia has led to teachers expressing their dissatisfaction brought about by the increased pressure of trying to meet the set targets of students performance in order to be compensated. The teachers unions have had the responsibility to champion the rights of the teachers who are the members. (Blyton and Turnbull, 2004)


For effective collective bargaining teachers through their trade unions are expected to be united and speak in one voice. This implies that with such practice they will have a bigger advantage because their grievances can be solved with ease and with fewer complications. Channelling grievances through trade unions will give them an added advantage and they may be rewarded with payments that they will be comfortable with unlike when they just express their individual opinions to the relevant paying systems.

Collectivism v individualism

Individualism is all about achieving individual goals while Collectivism can be defined as a system that asserts the primacy of collective goals rather than individual goals. Through collectivism individuals’ requirements are viewed to be of less significance than that of the entire society. Individual privileges may be constrained if they are seen to go up against the objectives of the society. Today collectivism is practiced in Australia as socialism whereby socialism can be traced back to scholar known as Karl Marx (1818-1883).

In his argument, Marx takes the view that the government or the state ought to own the way of production to guarantee a just reimbursement of workforce and to steer clear of mistreatment of the masses by a few individuals who take advantage of others for their own benefits. Socialism are of two forms; the first one being that of communism whereby its supporters supposes that socialism can only be attained through cruel revolutions and dictatorship. The second form is that of social democrats whereby its supporters seek to achieve socialism or collectivism through democratic means. (Hyman, 1975)

Merit/performance pay system in Australia have been viewed by the teachers unions to be individual means of compensating performance and thus these unions have been seeking collectivism where all teachers are remunerated equally and depending on there competences. Collectivism in teachers performance may be achieved through the concept of collective bargaining by both the teachers unions and the employer in this case the Australian government. (Hunt and Provis, 1995)

Fairness v competitiveness

In order to achieve goals in any learning institutions fairness should be practiced and unfair competition should be avoided because it may results to conflicts between the teachers in teaching fraternities in Australia. If merit pay system is encouraged in the teaching profession teachers will compete for brighter students. This implies that teachers will feel secure and be sure of more bonuses if their students are bright and can perform well in their studies. With such system also teachers in Australia may result in competition whereby they try to outdo each other in terms of their remuneration that they get from there bonuses. This means that teachers can manipulate the results of their students in order to receive high bonuses than that of their fellow teachers.

The HRM perspective

Human Resource Management strategy may be defined as a calculated means by which the enterprise deploy its human resources to accomplish its purpose and basic objectives under the most advantageous circumstances. This implies that the HRM strategy defines the direction in which the learning institutions in Australia intends to move and establish the framework of action through which it intends to get there due to the efficiency of the teachers. This is because the institution management and especially the Human Resource Departments believe that people are the most important assets in the institution as compared to other assets that aid in running learning institutions. (Maund, 2001)

How can performance be assessed?

The human resource perspectives take the view that performance can be assessed through the overall performance of the human resource and in this case the teachers in the various learning institutions. Performance can only be assessed through organizational effectiveness in learning institutions in Australia. Organization effectiveness can defined as achieving results in an organization through a well organized and coordinated series of managerial activities that comprises of planning, leading, organizing, directing, and controlling of all the resources in the organization including teachers in order to achieve desirable results.

Organizational effectiveness involves number of activities including; recruiting competent, motivated and qualified teachers in order to achieve good results, good communication system in the learning institutions, unambiguous policies, decisions and regulations, a conducive environment for teaching, good management, ability to adapt to  any changes, and building a viable and strong culture and mission among others. (Sparrow and Hilltop, 1994)

Therefore organization effectiveness can only be achieved through management functions; planning, which encompasses defining learning institution’s goals establishing an overall strategy for achieving those goals and developing a comprehensive hierarchy of plans to integrate and coordinate activities, organizing, which is the determination of what tasks have to be done, who does them how the tasks are to be grouped? Who reports to whom and where decisions are to be made.

Controlling, this involves monitoring the teacher’s performance, leading, which involves head teachers motivating teachers, directing the activities to be done, selecting the most appropriate channels of communication and resolving any conflicts among the teachers. There are numerous ways in measuring the effectiveness of learning institutions and include; productivity, profits, stability, turnover, growth among others.

How can differences in performance be rewarded?

Rewarding differences in performance is a difficult task in learning institutions and especially in regards to teachers in Australia. It will be wise if the employees in this case the teachers are paid according to the work that they are doing. A good remuneration system that will involve paying better wages to these teachers as required in their profession plus other benefits when they have achieved the set goals. It is prudent for job evaluation to be carried out in order to reward performance.

Job evaluation is all about the relative ranking of an individual job in relation to other jobs that exist within the group. This also refers to technique used in ranking of jobs in an organization. This is normally carried out on the basis of various responsibilities and duties that are assigned to the specific job or task. (Sheridan and Provis, 1998)

The results of the job evaluation process include the job being assigned a specific range of payment.  The range normally includes a maximum pay rate that the specific job can attract and also the minimum rate of payment that can be given to a person holding such a position. Job evaluation as a management tool has been used by employers and managers for approximately more than seventy five years.

This management tool has been used both in the private and in the public sector including in learning institutions. Basing on some generic factors, the value of each teaching job is well defined in the job evaluation process. When the teachers responsibilities are evaluated in terms of their results achieved then they can be rewarded with exactness and without prejudice. (Turner, 1962):

Will it actually improve performance?

Rewarding difference in performance through job evaluation is very important to employers and managers especially in learning institutions in Australia and actually may improve performance. The reason as to why rewarding difference in performance as a management tool never goes out of fashion is because it plays a big role in reducing teacher’s turnover rate.

One of the steps involved in job evaluation is bench marking the jobs. This is done in relation to the jobs that have been evaluated before.  In this case the bench mark jobs are those that are commonly included in salary surveys found in most learning institutions. In this process the bench mark jobs of internal pay structures are related to the external structure’s existing in the labour market that is in other institutions.

This greatly helps in reducing employee turnover in the various learning institutions because teachers will be satisfied with their pay. This is because job evaluation carried out will enable the learning institution’s pay grades to be at per with competitor institutions. In this case teachers will not see the need of looking for greener pastures since their pay grades will be similar to what their colleagues in the same positions are paid in other learning institutions. This is really important to employers and managers because they will not be worried about losing teachers to better paying learning institutions and will also motivate the teachers to produce results. This generally plays a big role to stability in the organization. (Anderson, Provis, and Chappel, 2002)

Possible disadvantages of actuality performance?

There are some disadvantages associated with actuality performance and one can be that of teachers being under pressure to produce the best results in their teaching practice. Because of such pressure sometimes they feel over strained and hence they are low motivated at some level. It may also result to unfair competition between the teachers and this may lead to producing bad performance through sub standard teaching practices thus students may not gain the required knowledge and may be termed as half-baked in the job markets. (Provis, 2004)


Performance/merit pay can be both effective and ineffective in learning institutions in Australia. For example with such system teachers can produce the best results because they will be motivated to get bonuses from their work. On the other hand if not utilized well teachers may create an environment full of unfair competition in an effort to produce good results from their students and they may engage themselves in bad activities like leaking exams to students before the exam dates so that they can perform better. This implies that students will not have an opportunity to gain a wider knowledge but instead they will be narrowed to subjects and topics that will be included in their exams. (Provis, 1986)


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