ABSTRACT
The employment contract is an indeterminate exchange, whereby a labour power (in one form or another) is exchanged for a cash wage (Hyman, 1989). In other words, one of the key sources of disputes and conflicts in the employment relationship is the difficulty in quantifying what is a fair day’s work for a specific pay rate; engaging with this is at the heart of reward systems. The latter is easy to quantify, the former less so. Not only does this make for an inherent tension in any employment relationship, but also places pressure on both the firm and the individual employee to quantify the former. Organizations may adopt a very simple approach to pay – for example, paying the bulk of frontline employees as little as the external labour market will bear, or in line with the minimum wage, or adopt a more sophisticated approach. The latter could entail negotiating wage rates with employees on a collective basis, or adjusting pay rates to the perceived contribution of individual employees. Looking back to the industrial revolution, pay systems were generally tied to output, which in most cases was easily measurable. As workers grouped together to fight the worst excesses of low rates and high quotas, there was a subsequent change in the power relationship between employer and employee. In Britain, this resulted in a shift towards agreed rates for a job, where collectively all performing a particular job would be paid according to the same scale. However, since 1979, there has been an ongoing and cumulatively dramatic decline in unionization and, at the same time, a growing popularity in a return to an emphasis on payment for output or results, this time in the shape of performance related pay, often on an individual basis.
