Performance matters!


UK companies are putting an increasing emphasis on their overall financial performance when setting basic pay increases, according to consultants Watson Wyatt.

The firm's 2003 Salary Budget Survey Report shows that 48 per cent of companies described company performance to be the most important factor for influencing basic pay increases, up from 42 per cent in the same survey last year.

Individual performance appears to have become a less important factor, ranked as most important by only 20 per cent of companies in 2003, compared with 29 per cent in 2002. Team performance has also reduced in importance, with only 1 per cent of companies in 2003 ranking it most important, compared with 6 per cent in 2002.

"The majority of companies use a mix of market data, company performance, team performance, individual performance and cost of living factors when determining basic pay increases," said Nick Shasha, a consultant at Watson Wyatt.

"But the weight of importance of each of these factors varies not only from company to company, but also over time. The trend this year towards company performance has largely been driven by the tight financial constraints under which many companies are operating. Companies wishing to reward individuals or teams are increasingly likely to do so via incentive pay rather than through basic pay increases, subject to affordability."