Performance-related pay, or pay for performance is another tool to be used for the motivation of individuals (employees). I used word individuals because it always related to the individual’s concerns and disregard the element of the team or working together for mutual benefits. Every new technique has been developed to update and make the system fair, easy, and creative. So, all these techniques possess pros and cons. Here I will share some of the pros and cons for performance-related pay which I know so far.
The pros (advantages) of performance-related pay
Pay for performance will help the employers to define the particular pattern of work/task and leave individuals to achieve and get paid according to their performance. Doing this will surely improve wages criteria, competition, keep employees up-to-date because they will be eager to earn more and for that, they will be self-motivated toward learning as well as improving their personal development.
Furthermore, Pay for performance will also enhance to keep and maintain the merit system within the working environment. Employees will only be paid what they actually give output will also increase the competition and help organizations to retain the talented and competitive employees.
Enormous researchers, managers, studies, and I believe that performance-related pay is an effective tool to cope-up with the poor performance holders.
The cons (disadvantages) of Performance-related pay
Performance-related pay (PRP) will surely affect the team performance and the element of cooperation from the workers in both product and services based organizations.
It will be challenging for the employers of the services based organizations to measure the units of the task for their workers, who will possibly be paid per performance as if they go for measuring the services against the hours the workers spend in the working place will surely be injustice with those who spend their hours fairly. So, PRP is challenging to be executed in services-based organizations.
In case, the employer appoints a hard task to perform, and if the employee fails to achieve that particular task which will consequently affect the pay will surely de-motivate to that particular employee, no matter the employee Is very regular to his/her achievement and has always a positive record. But the system will hurt the motivation level of that particular employee.
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