Severn Trent links pay to water quality

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The Independent Online
SEVERN TRENT Water has struck an unusual pay settlement in which the size of its employees' wage packets is linked to the quality of its water.

The privatised utility has replaced its performance-related bonuses with a quality-related scheme, based on the cleanliness of its end product.

'If the standard of water coming out of the tap is not up to scratch then Severn workers will lose some of their salary,' David Payne, secretary of the joint union committee, said. 'That should concentrate their minds.'

It was the most far-reaching change he had ever negotiated in 20 years as a union officer, overturning the usual performance measure based on how many house calls are made by meter readers or the number of sewerage pipes repaired, he said. Instead, a percentage of each employee's salary will be based on whether Severn meets European Commission directives on water quality.

The move to a quality-related measure was highly original, the Industrial Society said. Although there are drawbacks, the IS thought the idea could be imitated throughout industry.

'I have never come across such a single-minded way of focusing an entire organisation on what it exists to do,' Jenny Davenport, head of employee relations at the IS, said.

Terry Corner, Severn's industrial relations manager, spent two years trying to push through the new pay structure for the company's 3,200 staff, who will also get extensive training. From now, 5 per cent of their pay - about pounds 600 for a worker on an average salary - will be quality-related. This will rise to 10 per cent in 1994, if Severn hits its targets.

Mr Corner said: 'It is a pretty important culture shift within the company. The idea behind it is not unlike the approach companies take to their salesmen, providing incentives to meet targets. An incentive overcomes that little bit of Ned Ludd in all of us.

'It will not cost any extra money because the incentive is part of the negotiated wage settlement, rather than bonuses. And it should help us be the first UK water company to achieve 100 per cent compliance with the EC directives.'

He believes the deal sets the pace for the rest of the water industry. 'I have had telephone calls from my counterparts in other water companies, and I would not be surprised if they followed suit.' In a random poll of other water companies, however, most were aware of the new deal and none had plans to follow suit.

Ms Davenport said the idea of linking salaries to the quality of the end product was currently confined to small groups of workers, and she foresaw problems applying it to large organisations.