Experience of Introducing Performance-based Rewards

72.  A common thrust of pay reform in all the countries we have surveyed has been efforts to link pay more closely to performance.  As already indicated, in practice this has meant progressively moving away from traditional fixed pay scales, with more or less automatic increments, to a range of performance based pay arrangements.  In addition to flexible pay ranges which have already been described, other performance related reward arrangements that have been implemented include:

· Individual performance bonuses – both “one off” and incorporated into basic pay

· Team based performance pay, which is less common and is typically associated with meeting performance targets, or completing a particular task or project.

73.  Much of the emphasis on performance-based rewards has been focused on senior civil servants partly because of the importance of motivating and rewarding this group and partly because senior staff generally have more discretion and control over their work.  The proportion of senior civil servant remuneration that is now performance based and ‘at risk’ varies considerably between countries.  In Australia for example, around 80% of senior civil servants are eligible to receive some kind of bonus payment: the average payment being some 5% of total remuneration but ranging up to over 30% for certain individuals.  The Singapore Government has gone furthest with an average of some 40% of senior officer remuneration now paid on the basis of individual performance and overall economic performance.  Depending on the country concerned, more junior staff may not be eligible for any form of performance-based reward and, where they are eligible, the amounts involved tend to be more modest – usually less than 10% of salary.

74.  In most cases where performance rewards have been introduced, staff have generally not been expected to put any of their existing base pay at ‘risk’.  Eliminating automatic annual increments has in some cases, such as Australia, initially funded individual performance-based progression within the pay range.  In those countries with delegated pay systems, Departments have increasing control over the size of performance awards, whether progress increments or one-off bonuses, so long as they are met from within their overall expenditure budgets.  

　

75.  In general performance-based rewards are perceived to be an important ingredient of the broader public sector reform effort. However, in some countries they have met with considerable resistance from Trade Unions and staff, particularly in the early stages of implementation.  As indicated for flexible pay ranges, the success of other performance based pay systems appears to depend on the credibility of their supporting performance management frameworks.  Where the framework is considered to be fair, applied consistently and with appropriate moderation arrangements, performance-based rewards do appear capable of achieving tangible benefits both for the employer and for individual civil servants.

Implications for Hong Kong

76.  Given both the importance other Governments attach to improving the links between Civil Service pay and performance, and the very limited use of such arrangements to date in the Hong Kong Civil Service, we believe that there should be scope for introducing a more performance based approach to pay and reward policies in Hong Kong.  In examining this further, however, it must be stressed that our international examples highlight the need for extremely careful planning and preparation.  In particular, the following key questions need to be addressed in detail:

· Should individual bonuses be introduced and, if so, for which groups of civil servants should they apply and on what basis?

· Is there more scope for introducing team based performance rewards, building on experience to date in Hong Kong?

· Should individual or team bonuses be ‘one off’ in nature or incorporated into base pay?

· What changes are needed to the Government’s current performance measurement and management framework to support any such changes?

· What are the funding requirements?