The decline of incentive pay in British manufacturing

Abstract

Motivation theories and the strategic pay literature envisage that the management of employees can be well‐served by financial incentives and other forms of pay flexibility. Traditionally, UK manufacturing has made extensive use of variable payments systems (VPS), notably piece‐work and bonuses, but these have declined at the same time as managerial control over pay‐setting has increased. Evidence from six case studies suggests that a focus on pay is only part of the picture. Increased competition and change makes the design of VPS more complex, and new forms of work organisation become the focus of performance. In this context, firms have (i) abandoned individual incentive pay and (ii) aggregated VPS in support of broader objectives.