Wandsworth LBC is considering putting a portion of salaries at risk should staff underperform and not meet their targets.
The council’s chief executive Paul Martin told the communities and local government select committee investigating senior pay in the sector that he had asked management consultants to look into this approach.
However, senior figures at Camden LBC told the committee they were not convinced by the idea, originally put forward in Will Hutton’s report on senior pay in the public sector. They argued one-off bonuses provided a much better incentive.
“Earn-back” is a system in which a percentage of somebody’s annual salary is put at risk and can only be retrieved by meeting performance targets.
Speaking at the committee hearing, Mr Martin said: “We’re very interested in this.
“I think he [Will Hutton] makes the point that pay related to performance is important but that can be difficult politically for public sector organisations as it can be seen as bonuses which carry a certain tarnish.”
Mr Martin said 2,300 of the council’s 2,800 staff were already in a performance-related pay scheme but added that it could be seen as “a one-way street” with people being rewarded for doing well but not earning a reduced salary if their performance was not up to scratch.
“In summary, we think this [earn back] is an interesting proposition,” said Mr Martin. “We are currently reviewing our pay arrangements and we’ve specifically said we’d like to see whether that could be incorporated into our arrangements.”
Mike Cooke, chief executive of Camden LBC, said while he supported the notion that a proportion of total earnings should be re-earned every year by those at the very top of the organisation, he would prefer one-off lump sums being paid out.
He said: “I personally believe that the concept of earning back salary is a bridge too far for employees and would not pass an acceptability test for employees – it would be extremely difficult to get buy-in, support and commitment to that.
“However, that is very different from a concept of employees understanding that if they work hard and deliver excellent performance they have the opportunity to earn a variable or one-off payment.”
Sarah Hayward (Lab), Camden LBC’s leader, said: “I think employees need to be treated with respect and know they can expect a certain salary and then beyond that you recognise good or excellent performance.
“I’m not sure how motivated people would be if they were working under the cloud of uncertainty that they might lose some of their pay at the end of the year.”