Public employment and management

Performance Related Pay for Government Employees


Over the past two decades, governments battling budget pressures and public perceptions of civil servants as under-worked and overpaid have been seeking ways of making the public service perform better. The question of how to reward civil servants has remained a thorny one, in a changing world, where public service posts no longer necessarily offer a job for life and where the public employer is increasingly in competition with the private sector for the top performers. One solution – widely used in some parts of the private sector – is to replace or complement the traditional civil service system of automatic salary increases based on length of service with financial reward for good performance, or performance-related pay (PRP). PRP is increasingly used in public administrations of OECD member countries.


PRP is part of the key policy options and new approaches to human resources management in the public sector that the OECD Human Resources Management Working Party examines, on behalf of the OECD Public Governance Committee. The OECD report on performance-related pay provides a comprehensive overview of the trends in PRP policies for government employees (at the central level) in selected OECD countries over the past two decades and draws some lessons from these experiences. The report is based primarily on twelve country reports that were presented at an OECD expert meeting in October 2003: Denmark, Finland, France, Germany, Hungary, Italy, Korea, Spain, Sweden, Switzerland and the United Kingdom – all OECD member countries – and Chile, which is an observer to the OECD Public Governance Committee. Canada and New Zealand contributed subsequently. The report on PRP has been published by the OECD in June 2005.


The report explores the various PRP designs and emerging trends, investigating the reasons why PRP policies are being implemented and how the policies operate concretely. The report also aims to analyse the apparent impacts of PRP policy. The results of such policies have been surprising in many ways. Staff are less motivated than might have been expected by the prospect of more money for working better. But performance-related pay can help improve performance when it is applied properly in the right managerial context, if not because of the financial rewards then indirectly through the changes in work and management organisation needed to implement it.

For more information, please see the SIGMA website.


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