Pay practice selection in the UK private sector: the role of human capital based employment groups

The purpose of this paper is to evaluate the extent of pay practice differentiation between human capital based employment groups in the UK private sector. The proposition, based on human capital resources (HCR) theories, that organisations will differentiate pay practices for employment groups with different human capital contributions (i.e. knowledge-based workers and job-based workers) is tested through analysis of survey data (n=302) drawn from CIPD reward management annual survey 2012. Findings indicate that in many areas of pay practice there is considerable differentiation between workforce employment groups lending support to HCR arguments. Pay practices for job-based employees are more market-oriented, with less emphasis on variable pay and include more traditional practices such as collective bargaining and pay spine structures. Knowledge work is associated with an emphasis on internal equity, rewarding individual value or behaviours and much more pay variability. However, there are key areas of practice such as pay level market positioning where organisations do not appear to differentiate between employment groups. The paper concludes that while organisations seeking sustained competitive advantage through building core competencies may differentiate pay practices according to different knowledge, skills and abilities (KSAs) in different workforce groups, other internal and external factors may explain the non-differentiation of certain practices.