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Performance-related pay - .. employment compensation ..

Performance-related pay

Performance-related pay

Piece rate or pay for performance, not to be confused with performance related wage increases is the wage paid to the system based on the positioning of the individual, or group on their pay group on how well they perform. Car salesmen or production line workers, for example, can be paid in this case, or through the Commission.

Many employers use this standards-based system for evaluating employees and setting salaries. Standards-based methods have been in de facto use for centuries among Commission-based sales staff: they get a high salary for selling more, and low performers do not earn enough to keep it worthwhile, even if they manage to keep a job. In fact, the salary would be revised up or down periodically, typically annually, based on the performance of individuals or teams. The reward is the wage of: with the expectation to be highly paid group for high efficiency and low band for the low performance.

In comparison, the associated performance salary increase will see the reward in the form of higher wages. The better characteristics of an individual or group is a big upgrade, in addition, if the performance was poor, the associated growth will be minimal, if at all. Award wage increases: with the expectation of a high rise to pay for high performance and low or zero growth for the poor performance.


1. Advocacy

Professor of business theorists J. And others support Vasey this payment method, which is often called the PDP. Ya believes that money is the main incentive to improve performance and introduced the widely used concept of the work is known far beyond the theory of business, since at least 1549.

In addition to motivating the rewarded behavior, standards-based payment methods may provide a level of standardization in the evaluation of the employee, which can reduce fears of favoritism and make the employers expectations clear. For example, the employer may set a minimum level of 12.000 strokes per hour easy data entry jobs and reassign or replace employees who cannot perform at that level.

With a PDP, employees can expect their performance should be objectively evaluated in accordance with the standard of their work, not on the whim of a boss or against any-climbing average of their group. It is quite normal to put a new ignitor in the lower part of the range remuneration, and subject to normal performance, move them to the middle of the target market in the range of 3 to 5 years. To promote themselves, some unethical managers to pay wages grows at a living wage instead of a true progression on the scale. It gives short term savings but in the long run leads to low morale, low productivity, poor connection, and even the employee resigned after they were trained. All these consequences are costly to the business. But used properly, PRP is a very effective way to get the best out of your employees. However the opposite phenomenon, when workers produce pay-related performance, if salary remains below 80% of the salary range for any period of time.

Successful managers and organizations know that in order to maximize profits, it is absolutely necessary to hire and retain the best employees. If the business always tries to maximize profit, it will be actively trying to reduce costs at every opportunity - including staff salaries. In fact, most companies pay employees as little as they can get away with paying. However, employees who, in turn, provide as little effort as they can get away with. Many companies however, still adhere to the archaic, counterproductive to the goal of trying to minimise compensation. Although it may seem cost effective to apply this profit-first mentality low-as-possible salary in the end cripples productivity and employee engagement, as well as damages the bottom line.


2. The opposition. (Оппозиция)

The fundamental criticism of the productivity lies in the fact that the performance of a complex task in General boils down to a simple, often single measure of efficiency. For example, the hotline of the centre may be judged on the quality of the worker based on the average length of conversation with the client.

As a simple measure, this gives no connection with the quality of care, for example, if the problem has been solved, or if the customer appeared satisfied. Productivity can also cause a hostile work attitude, and in periods of low levels of support, where multiple people can compete for the attention of one customer. If the client already has helped more than one employee, further resentment may be caused if the Commission accepts the one who is going to make a final sale. Macroscopic factors such as economic slowdown may also make people appear to be performing at a lower level, regardless of actual performance.

Systems based on the performance met with opposition as they are adopted by corporations and governments. In some cases, opposition is motivated by specific ill-conceived standards, such as one which makes employees work at dangerous speeds, or the system, which does not take all these factors into account properly.

Another example can be seen in the responses of public policy to incentive payments or bonuses in the financial sector after the financial crisis in 2008. The structure of incentive schemes remuneration is considered to be one of the factors of the crisis and regulators around the world, koordiniruyutsya the financial stability Board issued recommendations to ensure that the incentives scheme was modified. In Europe this has led to capital requirements, legislation, directives which set limits on the variable or the payment of which may be no more than 100% of fixed pay for the person in any given year, rising to 200% with shareholder approval.

In other cases, opposition is motivated by dislike of the consequences. For example, a company may have a compensation system which paid employees strictly according to their seniority. They can change to a system that pays sales staff according to how many they sell. Ineffective senior staff will argue that their income cut to match their level of performance as well as high-performance new employee might prefer the new agreement.

Another argument is that some indicators may be subjective opinion the same quality of work may vary from Department to Department within the company and from the head to the head.


2.1. The opposition. Research. (Исследования)

Scientific evidence has increasingly mounted indicating that performance of labor leads to the opposite of the desired results when applied to any work related to cognitive, rather than physical ability. Research funded by the Federal Reserve Bank undertaken at the Massachusetts Institute of technology with the participation of professors from the University of Chicago and Carnegie Mellon have demonstrated repeatedly that while undertaken the task purely mechanical due to work as expected. However, once basic cognitive skills are not required, it actually leads to poorer performance.

These experiments were repeated a number of economists, sociologists and psychologists with the same results. Experiments were also conducted in Madurai, India where the financial amounts involved represented far more significant sums to participants and the results were again repeated. These conclusions were specifically selected Daniel H. Pink in his work examines how motivation works.


3. Cultural aspects. (Культурные аспекты)

An international study by Schuler and Rogovsky in 1998 pointed out that cultural differences affect the types of reward systems used. According to the study, there is a relationship between

  • Systems incorporating extensive social benefits and femininity and.
  • The plans of employee ownership with individualism, low uncertainty avoidance and low power distance.
  • Status-based systems of remuneration, in contrast to the achievements and high uncertainty avoidance.
  • Activities of individual systems and individualism.

See Geert Hofstede to measure the used cultures.

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