Benefits Of Performance Related Pay

Further, by understanding the characteristics of new pay, the responsibility for day-to-day salary management shifts. Which also puts back the traditional classification from the broadband range and vast salaries ranges. For instance, paying the job and the person, and dealing with the emphases of performance appraisal, the range of rates, and peers, subordinates, and clients, and their customers. In summation, the merit pay for the individuals has replaced the team, and group incentives replaced. We now increasingly tailored the pay plans for particular work situations.

In corporate culture, equality, talent, aptitude, ethics and loyalty develops the outlook for any employee from all the directions. Managers keep the supposed contemplations in the notice to decide the employees’ future responsibilities and pay scale. In fact, Compensation is always based on employees’ performance, loyalty towards the organization, job exploration, reliability factors, utility, and reputation in the internal environment of the business and so on. Also, sometimes, financial statistics of the company, salary grade, current salary, appraisal rating play a key role in disseminating bonus and other salary and job analysis decisions (Garen, 2006). However, it might happen that internal politics, hegemony, nepotism have a big part for the compensation and job related decisions as well.

A Performance-Based Pay system is an increasingly popular compensation method used by organizations to increase productivity. A goal for all companies is to try and remain competitive and control costs, this is a reason for performance-based pay systems becoming more popular. This type of system attempts to link compensation to performance. (Gena Richter, 2002) These systems are directly tied to organization or individual performance and are most effective when based on objective measures of quantity or quality of performance. If we wish to have a direct impact on work motivation, it must be linked directly to the performance of desired behaviors. In order for to put this type of system into place, performance evaluations must be conducted regularly , as well as training and development for those with performance that isn't quite up to par. These additional resources will be necessary for our organization if we implement a performance based pay system. (William B. Bernathy, Ph. D., 2004)

Indirect compensation has a large effect of boosting job performance. “The biggest problem with a straight-pay structure is that employees quickly become used to earning a certain level of income regardless of the results they produce. Promotions do usually increase pay, but the motivational influence stems from recognition, increased responsibility, more challenging work and a personal sense of accomplishment all of which are motivating factors, according to Herzberg.”

A well-articulated compensation philosophy drives organizational success by aligning pay and other rewards with business strategy. It provides the foundation for plan design and administration and anchors current and future plans to the company's culture and values (Kaplan, 2006, p.32). Recognizing and rewarding achievement is the cornerstone of the company A’s compensation philosophy. The mission of the company is to attract, select, place and promote all individuals based on their qualifications. The company believes that performance-based compensation helps attract, develop and retain talented professionals. In addition to base pay which based upon local market conditions and targeted to be above market, the company provides the following types of potential compensation to reward performance:

First, the reward should be valued. Reward will not provide motivation for higher performance if it had no value. According to different situation, the reward should be various for different level of staff. For example, an extra compensation package can be given annually to those valuable skilled physicians. It is a useful way to attract and retain good doctors, which will have a aggregation effect for those experienced personnel. These aggregation effect could increase the FSC performance and make a benefits to the organization effectively.

By offering employees an increase based on good work performance or by completing jobs on a timely basis employees are motivated to do the best they can for the company. Employees will strive to do the best they can and excel at their job. The company also benefits by being able to set up guidelines of what is expected and by rewarding employees they will have employees that are accomplishing more and have a better attitude about their job. Long term by giving employees increases employees will be apt to stay with the company and this benefits the company in not having a high turn-over

71). It is believed that profit-sharing really helps build assets in various ways and employees desire to feel as if they are being sufficiently compensated for the function they are accomplishing for the organization. According to research developed in the case study, it can be in the company’s greatest interest to assist employees in building assets, because personnel were more expected to finish out the year if they understood it would guarantee them a bonus (Contemporary issues in human resource management: Case Studies, 2011, pg. 74). Likewise, the analysis discovered personnel would be encouraged to work harder if they anticipated a profit on their efforts by warranting bonuses that amplified in relation to their efficiency (Contemporary issues in human resource management: Case Studies, 2011, pg. 74).

Pay for performance systems have further been proven to have two advantages for organizations: attracting more high-quality employees and motivating employees to exert more effort at their jobs. (Gordon, Kaswin) This paper will show the positive benefits of performance pay as

Furthermore, Herzberg’s Two Factor Theory identifies that organizational policies, status, security, base wages or salaries, and work relationships have a direct effect on job dissatisfaction. Factors such as achievement, recognition, the work itself, responsibility, advancement and growth affect job satisfaction (Schermerhorn et al., 2008). The major weak points in the Scanlon system are the way bonuses are calculated and the fact that the system does not appeal to intrinsic sources of motivation. As it stands, the bonus system for higher performance is complicated and it only accounts for hard numbers. The system ignores qualitative factors and does not enrich the employees’

O’Neil (1998) suggests six minimal criteria for the design of a performance based pay system. The first of these criteria is that the reward system should be self-funding, that is, the performance increases should as a minimum offset the cost of the rewards provided. The second criterion is that the distribution of the rewards must be consistent, fair and justifiable. In addition reward plans must be transparent and clearly communicated. The third criterion

Although research generally confirms that pay-for-performance plans can influence greater outcomes, it is unclear how effective different pay plans are relative to each other (Park, 2012). Like most things in business, compensation is something that requires evaluation, study, assessment, strategy, modeling and integration.  Achieving a pay for performance culture does not happen without paying attention to the behaviors, activities, rewards and motivations that have to be linked and reinforced through a well engineered and successfully executed process.  Actually if that process does not tie rewards to shareholder financial objectives, employ the proper mix of compensation elements, result in meaningful dollars, embrace performance that employees can impact and are effectively communicated and reinforced, then the results it produces will likely fall short (Vision Link Advisory Group, 2013).

Indian organizations are increasingly going global. Also multinational corporations (MNCs) continue to proliferate in India. These forces have given rise to the increased use of expatriates for inbound and outbound assignments. As such, new ways of determining performance and compensation have been developed. Performance management systems are now commonplace in Indian organizations and MNCs operating in India. The most frequently used system is the Target Based Evaluation/MBO. Most organizations are now also linking performance to rewards.

Many companies inaccurately substitute traditional bonus pay with incentive pay. A bonus pay is traditionally reactive while an incentive pay is proactive (R. Rajan, 2008). Traditionally, individuals had no knowledge of the bonus they would receive as it is only decided at the end of the year once all the figures have been collected. This results in a reactive bonus because the individual has no idea what he/she will receive. On the other hand, an incentive pay system will have targets and goals that must be reached and should have fair measures. He therefore knows exactly what he has to do in order to obtain a specific incentive. Therefore, incentive plans need to be well thought out and implemented in order to attract, motivate and

An incentive pay program can reward employees who continue to produce superior work or encourage employees who already produce good work to best. Sometimes, use an incentive system when employees are lack of enthusiasm of getting down to work and improving things. If everyone in the same job classification gets the same pay, there is no real incentive to do an outstanding job (French, 1990). Various incentive plans used to motivate all employees such as production staff, sales staff, administrative staff and managerial and professional staff on an individual basis. To be improved employee work performance, the incentive pay programs need to be fairly matched with the employees’ expectation. Properly designed and maintained incentive pay program has the potential to increase employees’ productivity and work performance.