Financial motivation - Performance related pay
Performance-related pay is a financial reward to employees whose work is:
- Considered to have reached a required standard,
- Is above average.
in another meaning: it is way of rewarding employees for higher performance.
There are a number of reasons why your employer might introduce this type of pay scheme. they may:
- be keen to keep current staff
- want to compete for new talent
- be seeking a fairer way of distributing wages
Performance-related pay has grown widely in recent years – particularly in the public sector. This is part of a movement towards rewarding individual performance which reflects individual circumstances.
According the Equal Opportunities Commission, a well-designed performance-related pay scheme would have the following elements:
- Objective setting
- Communication and understanding of objectives Consideration of performance against objectives
- Translation of evaluation into performance rating
- A link between ratings and the determination of pay
- A separate appeals procedure
the advantages of Performance related pay:
The survey established that key objectives of performance-related pay schemes are to:
- improve individual performance (92.9% of schemes surveyed);
- improve organisational performance (92.9%);
- focus attention on key objectives (88.8%);
- motivate staff (88.8%); and
- reward exceptional achievement (85.7%).
Fewer than a quarter of organisations formally evaluate the effectiveness of their performance-related pay scheme but three-quarters believe that it partially meets the aims of improving individual and organisational performance, the findings showed.
Respondents also said that performance-related pay also had the greatest positive effect on workers who were already high performers, but in some cases it worsened the performance of average or poor performers.
