Finance Work Is ‘performance pay’ an excuse for no pay rise at all?
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Is ‘performance pay’ an excuse for no pay rise at all?

Fairfax Domain sale
Editors and reporters would continue to determine what gets published, one of the two bidders vying the media group has assured a Senate committee. Photo: Getty
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Imagine working for a company where the main source of revenue is shrinking. Management has cut many hundreds of jobs and you’re working harder than ever to pick up the work your now-unemployed colleagues were doing.

Then imagine that management wants employees to only get pay rises through meeting performance targets. And then management gets a big pay rise based on cutting costs, most of which come from making your fellow workers redundant.

What would you do?

This is not a hypothetical for some Australian workers. This scenario is being played out at my former employer, Fairfax Media, publishers of The Age, The Sydney Morning Herald and The Australian Financial Review (AFR). Please understand, I want Fairfax to succeed and enjoyed working there, but it has emerged as a case study on the vexed issue of performance pay.

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It’s hard to argue against the principle, but the way performance pay is applied in the workplace is often inexplicable or even unfair. Fairfax has made headlines on the subject this week for all the wrong reasons.

When I was a junior manager as Melbourne bureau chief of the Australian Financial Review, the Fairfax HR department in Sydney argued that a good performance review did not mean an employee would get a pay rise. Indeed, managers were supposed to stress that performance review and pay rises were not linked at all.

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Fairfax photographers protest redundancies at the company.

I had some problems with this reasoning. Fair enough that a good review did not guarantee a pay rise. But surely a good performance review should at least help your case for an increase?

At the time, it seemed illogical but somewhat academic. The editorial staff were covered by an enterprise agreement that included annual pay rises, which usually came near to the inflation rate.

But those days are over in journalism, where advertising revenues have shrunk and so have newsrooms.

Fairfax is now pushing for a new enterprise agreement to include zero guaranteed annual pay rises and for increases to be entirely based on performance, reversing the company’s line of a decade ago.

After years of cutting jobs and closing printing presses plants, Fairfax has just reported an improved $224 million profit for 2013-14.

The small print revealed the salary of Fairfax’s top four executives had risen by more than 50 per cent to $2.4 million, which caused some agitation among editorial staff.

But mUmBRELLA later noted that most of these performance payments were mostly linked to cost-cutting. This rankled with journalists, who were arguably doing more work in more formats with fewer staff due to cost cutting and from print to digital.

mUmBRELLA has also reported that Fairfax management has informally offered pay rises of 2 per cent which would mostly come through a “merit pool” distributed by the editors.

But is it a merit pool, a pond or a drop in the ocean? Can employees understand the rules and financing of performance pay as well as management?

Other concerns arise. Employees of the big banks complain that their individual performance is rated and then placed in a bell curve of all staff. They might be performing well, but they are also being judged relative to others and can miss out.

Commonwealth Bank workers complain they are under pressure to sell financial products to get pay rises. Now, the CBA executives in charge of their financial planning division have got big pay rises and bonuses, despite calls for a royal commission into its practices.

At Fairfax, an audit of its existing merit pool reportedly found that 121 men received merit payments last year, but only 90 women. Male staffers got average merit payments of $6,824 but women got an average of $5,835 – about $1,000 less.

What do workers in other industries think of performance pay? Any cases where it works? Or is it a black box used to avoid across-the board pay increases?

Mark Skulley is a freelance journalist who is based in Melbourne. He was a reporter on The Australian Financial Review for almost 18 years, which included a decade covering national industrial relations and the world of work. He has since written for The New Daily, the Guardian Australia and other outlets.

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