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Performance Related Pay

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Performance Related Pay
Performance Related Pay

Author of Report:
Shevon Oxford (Personnel manager)

The purpose of this report is to gather views from staff regarding the introduction of a performance related pay system.

Requested by: Tony Milward (Personnel Director) of Transmitacom. Transmitacom is a company, which produces software for the telecommunication industry.

Date request was made: 01/11/04

Date completed: 16/11/2004

The data was collected from a variety of books dedicated to the subject of Performance Related Pay and from an article entitled: Performance Related Pay is it a motivator? Also from internet sources.

What is Performance Related Pay?
Performance related pay is the idea of Frederick Taylor who comprised his theory of scientific management. ‘It is a bonus salary increase awarded in line with an employee 's achievement over a range of criteria. ' These criteria depend on each job. (David Lines and Ian Marcouse pp)
A company that adopts this method has to set clearly defined objectiveso that staff know what they rae doing. Awards are decided based on appraisal results. They must link achievements to pay (and decide how much to pay and where the money comes from).
This table looks at the advantages and disadvantages of Performance Relate Pay from the article:
Advantages Disadvantages

• Only those who perform well get paid
• Rewards employees with highest productivity
• It is argued this system motivates staff
• It enables firms to recruit highly qualified staff who like the idea of being able to earn a bonus
• Encourages employees whose performance is not up to scratch to leave company on a voluntary basis
• Easy to identify companies aims and objectives
• High flyers find it attractive • Possible to give employees no pay rise at all
• Inflations means pay will be cut and this coupled with the indignity of being judged and found wanting would, would make it that employees seek a job elsewhere

• Union influence within the company


Bibliography: David Lines and Ian Marcouse (2000) A-Z of Business Studies 3rd Edition. Hodder and Sloghton publishing Edward Lawler (1983) Pay and Organisational Development. Addison and Wesley publishing company Ian Brooks (2003) organisational behaviour: individuals, groups and organisations. 2nd edition. Financial Times prentice hall www.tutor2u.net (2004) tutor 2 U limited. Accessed 16/11/04.
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