Pay for Performance

Pay for Performance

Introduction

Pay for performance is the form of pay, which links the pay of the employee to his or her performance. The main assumption regarding the pay for performance is that the best out of the employee can be attained with this system (Baron, 2005). Through this pay for performance system employee will be able to retain the high quality performers as well as attract the employees. They will be more motivated and willing to show high performance that will reward them at the same time bring more laurels for the company they work.

As we have recently gone through the serious phase of recession, yes that is of 2009. It crippled many companies and lowered the profits of major firms. Ultimately, it became quite hard for the many industries to keep using the base pay system or high base pay system. So many of the major firms shifted from this system into the performance pay system. A major trend of this system is seen in industries, which are service oriented (Cowling, 2007). That is the employee provides services to the customers, his pay will be variable and will depend on the quality of service delivered.

The basic benefit related to this performance pay system is that the employer will be able to retain the best employer while those employers who are under performing will be forced to leave. The negativity related to this pay for performance system is that it can become very hard for employees to measure or calculate the performance of the Employee. It is because we cannot measure the satisfaction of employees at an accurate scale. We can only measure it only near the actual figures. Thus, the drawbacks of this system are many but it is proving to be a good change for many organizations.

Approaches Available to Compensate Employees

There are various approaches available for compensating the employees. Each approach has its importance for the employees as well as for the employer of the company. Thus, each approach is fit for different companies and can be modified according to the needs of the end users or employers. The approaches are as following.

The Equal Partnership

The Equal partnership is quite a good way pay in the law firms. The basic principle of this pay system is that higher the employer is senior the more knowledge and skill he has got. Thus, this equal partnership will pay the senior partner with high pay while the lower or new joinees will get a low pay (Deming, 1986). The system works in a way like there is a firm, which has ten partners. 5 of them are new joinee while 5 of them are seniors and have got more than 3 years of experience. Therefore, the pay for performance system will work in a way that it will pay more percentage of profit to the seniors that is around 75% while the new ones will get around 25% of the profit. Thus this system of pay gives importance ...