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Indiana experiments with pay for performance

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in Compensation and Benefits,Human Resources

Pressured to demonstrate that they’re responsible stewards of tax dollars, states have begun to experiment with variable pay for government employees. Indiana is pointing the way with a tiered system that scrapped one-size-fits-all, across-the-board pay raises and replaced it with one that offers the highest rewards to top performers.

Last year’s performance reviews dictate the pay raises Indiana state employees will receive in 2012. Employees rated “outstanding”—about 5% of all state workers—will earn 6% raises. Those rated “exceeds expectations”—about one in 10 state employees—will see a 4% jump.

Most of the rest—around 75% of the workforce—will get 2% raises. Those who didn’t meet expectations won’t get a raise.

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