The Value Of Performance-Related Pay

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Performance related pay is a financial reward given to employees whose work is considered to have reached a required standard or is above average. “PRP criteria can relate to the individual employee, to work groups or to the organization as a whole” (Armstrong, 2002). It is fair to provide people with financial rewards as a means of paying them according to their contribution (Armstrong 1993:86). The primary purpose of performance related pay in any organization is to recruit, retain and motivate the workforce. It also helps in focusing employees’ minds on particular goals (Protsik, 1966); communicate to employees an organization’s core values, and change the culture of that organization (Kessler and Purcell, 1991). People spend an extensive part of their lives at work, so it is not astonishing that they expect to be rewarded and fulfilled with the job that they do. Motivation is concerned with why people do things as well as what drives them to act in a particular way. Understanding what motivates an individual is important in a workplace. Motivated employees are happier at work. They get more satisfaction from their work, they are absent less frequently, and work with more enthusiasm. This encourages them to contribute more, hence increasing the productivity in the organization. Unmotivated workers will not be as contented with their position in the work environment as motivated workers. The job might not be as important for them which may lead to a poor performance, which will lead to less efficiency and hence to poor productivity. A number of motivational theories explain how rewards affect the behavior of individuals and teams. Performance related pay can have a motivational effect. Employees are motivated to increase prod... ... middle of paper ... ...nna, Strategic Human Resource Management, New York: Wiley. Lazear, E.P., 2000, Performance Pay and Productivity, American Economic Re- view, 90, 5, 1346-1361. Paarsch, H.J. and B. Shearer, 2000, Piece rates, ¯xed wages, and incentive e®ects: Statistical evidence from payroll records, International Economic Review, 41, 1, 59-92. Prostik, J. (1996). ‘ History of Teacher Pay and Incentive Reforms’, Journal of School Leadership,6, 3,265-89. Taylor, Frederick Winslow (1911), The Principles of Scientific Management, New York, NY, USA and London, UK: Harper & Brothers Thompson, R, 2005 “Is Pay for Performance Ethical?” The Physician Executive, Nov-Dec 2005, pp 60-63 Vroom, V H. Work and Motivation. New York: Wiley, 1964. 331 p. ANON (2009) Tesco show what performance related pay really means. Available from www.taxpayeralliance.com/bettergovernment

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