Performance-based Compensation - Pay for Performance

2553 Words6 Pages

Performance-based Compensation - Pay for Performance

Corporations are looking for new ways to improve employee performance as well as remain competitive. Pay for performance is one method some businesses are utilizing to improve employee performance. Performance-based compensation exists when compensation is tied directly to that portion of an individual’s performance that can be effectively measured. There are a number of ways in which this may be accomplished and a number of examples as well how it is applied. One of the oldest examples is taken from the ancient Egyptians, where slaves working in the pyramids were given bread for superior performance. Payment of commission for sales production is one of the methods used today.

Most will agree that knowledge is the ‘key’ resource in this post-industrial economy. The challenge for many companies is developing an organization that creates and cultivates knowledge and learning. Pay plays a significant role in shaping workplace behavior. Most of the traditional pay systems reward the job the individual performs rather than the skills he/she brings to the job. The system is not being able to reward the things the company needs and this presents a barrier. The trend has moved away from pay for the value of the job, service and seniority. It is being replaced with paying for skills, knowledge, competency, performance and productivity, all which can be delivered through different invitations, from changes to base pay to introducing gainsharing.

HOW DOES PAY FOR PERFORMANCE WORK?

If part or all of the one’s salary is contingent on how well you actually perform your job, one will go the extra mile. The individual will attack his/her work with vigor and revel in the rewards. And...

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Johnson, Sam T. "Plan your organization’s reward strategy through pay for performance dynamics: Compensation & Benefits Review 30, Number 3: (May/June 1998): 67-72

Kalbaugh, G. Edward. "Opportunity Compensation." Rough Notes 141, Number 7 (July 1998): 71-72

Marino, Sal F. "Pay your rank and file fairly." Industry Week 248, Number 3 (February 1999): 18

Morrison, Arnold. "Performance Management and Pay Programs." [http://www/mdcs.state.mi.us/wf_aquis/Programs2.htm]. April 1997.

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"Guidelines for Administration of Merit Pay Plan." [http://www.hr.ucsd.edu/docs/classification/merits/guideline.html]. September 1998.

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