Performance-based pay to improve productivity, innovation

August 13, 2018 - 09:00

Dr Đỗ Đức Định, from the Hà Nội Institute for Socio Economic Studies, speaks to Khoa học & Đời sống (Science & Life) newspaper on performance-based pay.

Dr Đỗ Đức Định, from the Hà Nội Institute for Socio Economic Studies, speaks to Khoa học & Đời sống (Science & Life) newspaper on performance-based pay.

Early this month, HCM City People’s Committee chairman Nguyễn Thành Phong said State employees who fail to fulfill their tasks would be replaced by those who could. Their salary must be based on how well they perform and bonuses should be based on their productivity and innovation. What do you think about Phong’s ideas?

I totally agree with Phong on performance-based salary. Pay for performance is a salary/wages paid system based on positioning the individual, or team, on their pay band according to how well they perform. The system has been applied in other countries for years. In Việt Nam, payment is usually based on education level or position, which fails to inspire people to work more effectively or creatively. It’s good to apply performance-based salary. However, if HCM City applies such a system, it is necessary to calculate and harmonise the city’s policies with the national salary mechanism. In addition, it’s very important to identify the number of staff and qualifications required for every job.

Do you mean it’s important to measure work efficiency and effectiveness?

Yes! Now, we lack quantitative criteria to measure or evaluate work performance.

If we want to apply a performance-based salary system, we need to develop criteria to evaluate performance at every position. I don’t think it’s difficult to develop such criteria. For example, when I attended a business class in Harvard University, I learned that though two people that graduated with the same major in a university, one got a job with salary of US$1 million per year while the other got $36,000 per year.

The person got $1 million because he had innovation that helped his employer gain more than $1 billion and create jobs for dozens of other people. He is paid high because his innovation helps dozens of other people. It’s fair!

However, in Việt Nam, especially State offices, those with high education level or high position get high salaries. In some cases, they still receive a high salary whether they work or not.

Moreover, in Việt Nam, nepotism appears so common that people fear that without money or relationships, you can’t get a good job.

To accurately evaluate one’s performance at work, there is no room for nepotism.

Tailored salaries for specific jobs and performance are needed. What about changes in recruitment?

Changes are needed for recruitment. For example, in the case of HCM City, the city needs to develop a plan clarifying its organisations and human resource demand. Then, depending on its socio-economic development, budget and demands, the city could evaluate and impose salaries for each position. — VNS