Sticking with the same company for years is not likely to reap financial benefits, according to a new study. Indeed, loyalty doesn't pay at all - performance is key to commanding a higher salary or bonus.
Employees who work in different companies receive an average 5 per cent pay increase a year, compared with no pay rise for those who stay with one firm for the same number of years, the study found.
However, the research, which was published in the June issue of the Economic Journal, was based on the recruitment and compensation policies of the 5,000 largest companies in France, where unemployment is high and workers are less mobile as a result, says Professor Francis Kramarz, of Paris's Ecole Polytechnique, one of the report's authors.
French workers believe that their pay increases the longer they stay with a firm, which is rarely true, the study said.
In Ireland, "there has been a shift over the last decade where the focus is much more on performance", said Maeve Heffernan, senior manager of the reward advisory group at PricewaterhouseCoopers (PwC), which helps organisations determine how to pay employees. "Bonuses, for instance, are structured around performance, but not around longevity."
The dominance of US multinationals in the Irish labour market plays a major role in employers' focus on performance-related pay, with the exception of the public sector, Ms Heffernan says.
"The philosophy of parent companies in the US is driving this trend," she said.
"Most companies are much happier to financially reward people for good performance. If they pay people for staying a long time, they may end up rewarding the wrong people. It may be less like this at continental European companies."
Forty-one per cent of overseas companies operating in Ireland are based in the US, while 20 per cent have their headquarters in the UK, a report from Forfás showed earlier this week. Foreign-owned companies assisted by our State agencies account for 87 per cent of goods exported from Ireland.
Financial services providers have a high employee turnover rate due to competition for staff as a result of the growing number of foreign companies setting up operations such as fund administration in Ireland. The sector is expected to earn the highest average pay rise this year, Ms Heffernan pointed out. "Some staff turnover is preferable to none as it's good to get fresh blood and new ideas from people coming from other companies," she said.
Companies in Ireland are increasingly rewarding staff by paying annual bonuses or by including employees in profit-sharing schemes, while stock options are typically reserved for top-level staff as a long-term incentive.
Revenue-approved profit-sharing schemes, where full-time employees can receive up to €12,700 worth of shares tax-free each year, are becoming common at publicly listed companies.
Traditional Irish companies in the banking or insurance sector, though, are more likely to still value and acknowledge the length of an employee's service.
"It's a bit old-fashioned but a lot of companies may recognise a staff member's service at five-year increments, such as by giving a gift like a weekend away," Ms Heffernan said.
"Longevity is not a key driver for doing well at a company, but that's not to say people who stay on won't be successful," the PwC manager said. "They are just not going to get any special financial reward."
