Performance Related Pay

Employee Relations – This is ensuring there is a trust based relationship between line manager and employees. Line managers should be able to help employees, be approachable and offer guidance. Staff should be able to accept constructive criticism but also be able to offer this, if it is of value to the organisation.

Pay-for-performance programs are expected to expand across the United States health care in the near future, especially with the implementation of the Affordable Care Act. The pay-for-performance is going to continue to increase the quality of health care that the patient receives from their

Pay-for-performance plans are formal compensation systems that are directly related to organizational or individual performance. The United States Department of Labor defined pay-for-performance as a raise in pay based on a set of criteria put in place by employers, and notes that the Fair Labor Standards Act,

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)

I consider this benefit as a great opportunity to engage an excellent relationship between the job and the employees. Trust and relationships are totally related, and if a person is conceded with this benefit, you can assure not to lose him/her. This can be seen as a great management principle; because you offer the best you have to your workers in order to have a better performance on a job.

Companies might use these techniques in order to get the staff more involved in decisions being made for the organization. This may also motivate the staff as they would feel they are also part of the firm and not just ordinary staff working there.

Performance based pay strategy is a variable pay system which is intended to increase employee productivity by rewarding employees based on their performance rather than paying based on the time that an employee spends at work (Wisegeek). Due to the fact that performance based employees have a vested interest in the success of the company their productivity is likely to improve which can lead to the need for fewer employees to maintain production levels leading to a reduction in labor costs to the employer. Studies have shown that time based employees only produce 50 to 60 percent of the output of performance based employees (Atchinson).

Pay for performance is a common theme throughout almost all organizations. Merit increases, performance bonuses for executives, and commissions for real estate salespeople are common examples of this concept.

Pay for performance is an incentive program. A way to compare is when in sports a player can make more money for doing better or meeting certain goals. So if a pitcher pitches a no-hitter he may receive an additional bonus on top of his salary. Pay for performance concerning health care is looking at not only success rates but overall outcomes. This means Patient A has a surgery she comes through without complications, and she heals quickly, is discharged and when she comes back for a follow-up everything is moving along as the physician plan. This is a good outcome. Now if the same patient, acquires an infection,does not heal in a reasonable amount of time or dies then the outcome is not favorable and pay for performance is affected. because pay for performance is difficult to measure in long term situations many times, the outcomes are measured in sections such as various components that create a patient’s overall health rating. for instance, Patient B is 300 lbs suffers from high blood pressure, high cholesterol, and diabetes pay for performance would look at each component and see if the health services being provided are aiding in the betterment of the patients health. At the core pay for performance is more about accountability, keeping medical professionals abreast of what is really going on with patients regardless of income or background.

The main purpose of reward within a performance management system are to retain, motivate employees and reduce turnover.

Depending on how employees are rewarded for their work, there are four different incentive systems: personal pay, skill pay, bonus based pay, and profit sharing. Of these, PwC PSP utilizes a bonus based pay, which focuses on individual results. Processes, not outcomes, are the important factor. (Burton, et al, 2011)

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

Reward and recognition programs must connect the needs and expectations of the workforce with the company’s overall goals and strategies. A program that reinforces important company values and goals will encourage employees to act in line with such goals and emphasize the importance of achieving these goals. Alternatively, rewards which do not connect with organizational goals may convey a misleading message and encourage employees to act in a manner that does not facilitate the

The employees feel that they have greater responsibility and trust put on them, this can generate greater participation, commitment, and a better job performance.

Pay for performance is a quite rational theory. According to the U.S. Merit System Protection Board (2006), “Pay for Performance refers to a pay strategy where evaluations of individual and/or organizational performance have significant influence on the amount of pay increases or bonuses given to each employee” (p.1). This theory hope to use different salary to motivate and punish the employees according to the evaluation of their working performance. However, in the real world, it is very hard to implement in every organization, particularly in government and nonprofit organizations.