Major changes to pay and rewards systems in the public sector are necessary to get the most out of staff and achieve a step change in service delivery, according to a CBI report published today.

The CBI’s deputy director-general, John Cridland says:  "The government is missing a trick by failing to deploy smarter HR techniques. Not using pay and reward as genuine incentives to improve performance and service delivery is a lost opportunity."

The CBI report says that more public sector organisations need to take account of market rates, reflecting what is paid for equivalent roles, rather than using outdated national structures.

It says rigid pay structure in the public sector allows less scope to reward employees for outstanding performance. The public sector needs to give managers more flexibility in determining pay or bonus schemes.

The report dispels the myth that pay in the public sector is lower than in the private sector. In fact, the government’s own figures show average earnings in the public sector are higher, with their median rate of pay some 15% ahead of private companies.