This article will explore the subject of performance pay under the following divisions: common types of performance pay; performance related pay; advantages and disadvantages of performance related pay; essential attributes of performance related pay…
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Based on this research performance related pay pertains to such a system that relates the rewards extended to an employee to the overall performance of the organization in which that employee serves. The purpose of performance related pays is to motivate the employees. The other big objective behind the performance related pay is to synchronize and align the performance of the employees to the overall aims and objectives of the organization in which they work. Though, the performance related pay is mostly financial, but sometimes it could also happen to be non-financial. The payments made under performance related pay schemes are usually in addition to the actual pay that an employee gets. This makes the employees appreciate the fact that the rewards one gets for ones performance are not invariable and rather tend to be variable and separate. Many a times the augmentation in an employee’s annual basic salary could also happen to be related to one’s performance. Performance related pay helps the organizations retain the employees who have attained the top rank in relation to their pay scale and are still accruing an outstanding performance. In the present context, when the organizations are getting much flatter, the organizations are bound to abound in the employees who come under this category. Further, the opportunities for extending promotions in the flatter organizations happen to be much less as compared to the multi layered organizations of the past. Hence, the performance related pay is one viable method of improving employee performance and extending job satisfaction. Common Types of Performance Pay Over the last two decades, there has been a considerable rise in the performance related pay systems (Beardwell 1996, p. 148). Though the performance related pay system was more common in the private sector, there is no denying the fact that many public sector organizations are also evincing a gradual shift towards performance related pay systems (Beardwell 1996, p. 148). The best thing about performance related pay systems is that they link the payments made to the employees, to the group, individual or organizational performance (White & Druker 2000). The organizations resort to a wide array of performance pay systems, yet, the primary assumption behind all such systems is that the opportunity to get an enhanced pay will motivate the employees to work better and will positively impact their productivity (White & Druker 2000). Piecework is the oldest form of performance pay system which links the payment made to an employee to the units of output produced by one (Bassett 1993, p. 3). This motivates the employee to work harder and better, as the production of optimal number of high quality productivity units is bound to be reflected in one’s pay slip. A payment by results is one other major performance pay system, where the
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The bases of this arguments gets its source
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