The Impact of Performance Related Pay on Motivation

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ACKNOWLEDGEMENTS

My thanks go out to all who have helped me complete this study and with whom this project may have not been possible. In particular, my gratitude goes out to friends, facilitator and family for extensive and helpful comments on early drafts. I am also deeply indebted to the authors who have shared my interest and preceded me. Their works provided me with a host of information to learn from and build upon, also served as examples to emulate.

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DECLARATION

I, (Your name), would like to declare that all contents included in this thesis/dissertation stand for my individual work without any aid, & this thesis/dissertation has not been submitted for any examination at academic as well as professional level previously. It is also representing my very own views & not essentially which are associated with university.

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TABLE OF CONTENTS

ACKNOWLEDGEMENTSii

DECLARATIONiii

CHAPTER 1: INTRODUCTION1

1.1 Background1

1.2 Aims2

1.3 Research Objective2

1.4 Research questions7

1.5 Significance of the study7

1.6 Rationale of the study11

CHAPTER 2: METHODOLOGY15

2.1 Research Strategy15

2.2 Data Collection Techniques15

2.3 Approach to Data Analysis16

2.4 Scope and Limitations18

2.5 Reliability19

2.6 Validity19

2.7 Theoretical framework21

2.8 Introduction to next chapter22

REFERENCES23

CHAPTER 1: INTRODUCTION

1.1 Background

Performance management has been a central role for human resource process as it is a driver for the business effectiveness. Since employee performance is the key to business success, the continuous efforts have been made to find out various needs or aspiration that help organisation achieve the quality, efficiency, reliability, and intensity of performance. One of the approaches is Performance Related Pay. It is a tool used to improve the performance of employees and promote their performance. Performance Related Pay or PRP has been perceived as one of the most popular performance management in the private sector. Even though it is not as popular as the larger firms, PRP has increased recognition among SMEs (Tully 1998, p.277-286).

PRP is a pay scheme that includes subjective judgement such as performance appraisal to determine the rate of pay for each individual. (Kressler, 2003). As stated by Locke et al (1998) that money is the most important incentive in terms of motivational instrument. In addition, the improvement in performance after PRP introduction has been asserted in many studies such as the survey of IPD (1998), which is the body for personnel professionals. IPD survey suggests that about 75% of employers believe that individual PRP helps increase performance by focusing on company's objectives. This is confirmed by the research of Jenkins et al (1998) that the relationship between pay and performance is positive (Wageman 1995, p.145-180).

However, PRP possesses some doubt in its system. It can give a negative effect when it is not managed properly or perceived correctly as Gerhart and Milkovich (1992) concluded that individual incentives or other forms of pay for performance can yield higher performance if they are in the right circumstances. It is not questionable that PRP helps performance management as it reflects the performance level shown from individuals. For example, the IPD (1998) survey earlier supported the positive performance benefit, show problems with ...