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Structure of pay – an evidence-based framework

  • Report
  • 27th Jul 2022

The most common way to attract, retain and reward people – particularly in the private sector – is to use financial incentives including salaries, bonuses, leave or pension contributions. Financial incentives can be powerful, but they are difficult to design well and can produce a myriad of unintended consequences.

On their own though, financial incentives rarely lead to increased effort and performance. The best way to retain and motivate employees is likely to be through a combination of conventional financial incentives and non-financial incentives, such as letting staff know that they are appreciated or offering more flexible working.

In order to provide a comprehensive and concise summary of existing research this report has drawn primarily upon academic literature, prioritising findings from meta-analyses and systematic reviews where they are available.

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However, for the sections on non-monetary benefits, particularly with regards to effects on equality and diversity, and wellbeing, there is a significant void in academic research, meaning the conclusions were drawn mostly from grey literature, such as non-government organisations and blogs on business, management and careers.