PAY FOR PERFORMANCE

Pay For Performance

Pay For Performance

Background

Pay-for-performance links the performance of employees with the quality of work and the goals. Organizations all over the world are now turning to this system of performance appraisal in order to motivate employees to perform and increase the efficiency of the organization.

In the healthcare sector, insurance companies usually pay higher amounts for old methods of treatment even if newer and safer methods are developed. The reason is that although the new treatment methods are much safer, their success may not be proved. Therefore, insurance companies prefer the older and proven methods of treatment in order to reduce the risks (Wragg, 2004).

It is important for performance systems to ensure that the employees know exactly how their performance is going to be measures. Organizations should not believe that their employees would understand their requirement. They would have to make a continuous effort in order to guide their employees in order to ensure that they know exactly how to perform in order to achieve a certain level of pay (Bootsma, 2009).

Supervisors and managers have a direct influence on employees; therefore, their performance is based on how well their sub-ordinates perform. With the improvement in employee performance comes improvement in the organizations operations. Hence the increase in pay can be justified. However, the opposite is also true as due to problems in the performance system, the increase in pay may not be justified by an increase in the organizations performance.

Aim

The aim of this paper is to determine the impact pay-for-performance has on the performance of employees and that of the organization. Although this system is considered beneficial by employees, organizations need to measure whether they are at a benefit cost wise or not. It is common for employers to face higher costs due to increased salary but the organization can benefit if the benefits are high (United States, 1994).

Research Questions/Hypotheses

The research is aimed at determining the benefit pay-for-performance has for the organization. The following questions can assist:

1. Is the organization ready to pay employees extra for their performance?

2. Is the culture of the organization supportive to this system?

3. What goals will the organization set?

4. How will the recruitment and retention strategies change?

5. Which employees would be paid for their performance?

6. What should the level of pay be in comparison to the salary?

The efficiency of the pay-for-performance system is a major determinant of its success. While designing the pay-for-performance system, ...