ACC5502 Accounting and Financial Management
Added on 2021-06-17
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RemunerationAnswer – 1(i)Employers should always decide the pay of an employee on the basis of his performance, knowledge, skills, and attributes. Employees who are efficient and have better capabilities areattracted to performance related pay job formats. They are instilled with such formats to perform better and give best efforts. Most of the organization use performance related pay jobformats for the purpose of employees’ yearly appraisal and to facilitate incentive procedures. Performance related pay aims at facilitating appraisal system and building enthusiasm in its employees’. There are various countries that allow a system where the financial appraisal of apersonnel depends on their qualifications and designation. A lot of inequality of income was noted in different organizations. It was observed that such inequalities were mostly due to documented qualifications. Executive remuneration is one of the vital factors for the company because it helps the organization to retain the employees. It needs to be noted that the executive remuneration should be linked to the aims of the organization as it will lead to abalanced approach.There are many factors other than performance and paper qualifications on which the payment formats depends such as practice, custom, collective bargaining and behaviour of the labour industry. It has been observed that in order to achieve organizational objectives there is a downward trend mostly in the private sector in associating the incentives with the performance of the personnel in the last few years. Compensation has been closely knitted with performance. Resurgence of interest in performance related pay job formats is facilitatedby governments in most developed countries (Balakrishnan et. al, 2014). Currently most of the companies are associating employee’s rewards on the basis of their performance. The employees, managers and society altogether hold a different view on compensation. For the society, compensation should be evaluated keeping justice in mind. Equal pay should be facilitated for equal work instead of fixed incremental procedures in an organization. This happens where the employees are not rewarded on the basis of their performance but on the basis of fixed incremental systems that are prerogative at the same time. Taking tenure of service into consideration, many personnel are promoted automatically. If the rewards are facilitated entirely on the basis of what an employee deserves taking his performance and such other required factors into consideration then the employees might be more motivated, enthusiastic and might give in more efforts. This might also help an organization to retain its 2
Remunerationworkforce as well. The organization can retain the employees when the remuneration is in direct tune to the objectives of the company. this means that the employees needs to be remuneration as per their performance. In order to gain a competitive advantage in the industry, the organization should always opt for performance-related pay job formats. In order to enhance the performance and overall productivity it is required for the organization to keep its employees motivated and enthusiastic (Parrino et. al, 2012). Motivation happens when there is a remuneration structure based on the performance. The executives should feel that the remuneration is entirely based on the input provided by them.Employees who are not delivering as per the requirements and expectations are not rewarded legitimately for the management of the company would not want to pay employees for mere presence. It was a matter of debate that when compensation on the basis of prerogative rewards is given to employees then it develops an attitude of nonperformance in employees. A lot of research work for the human resource management has been infused in performance related pay job formats. Fewer samples are ascertained from non- western societies. Ghanaiansituation is focussed on account of such backdrop.The ultimate agenda of the research is to analyze the influence of the human resource management on the enthusiasm of personnel and on the ascertainment of company’s goals. There are various companies that adopted the PBP system which will further be assessed in the report. The important questions that are answered are-1. In context to the ascertainment of organizational goals will it be appropriate to say that performance-based pay (PBP) system is better than time-based pay?2. The connection with performance rewards important and appropriate enough?The analysis will help to understand the influence of performance-based pay. The outcome might also build interest in the concept and also serve as a foundation for the research work. The yielded information might also allow the policymakers to take the importance of performance-based pay as a guiding tool in both private and public domain. The performanceof a personnel is associated with his pay in the performance-based pay (Lee et. al, 2015). PBPis a compensation scheme that can be termed as a process of pay where an employee is provided an increment in pay or his appraisal is evaluated entirely taking his performance for a particular period into consideration (Horngren, 2011). It is one of the innovative concepts that has played a bigger role in terms of influencing. It is the system where an employee is provided incentives entirely on the basis of performance. When remuneration justifies the 3
Remunerationperformance it creates a sense of understanding and leads to enhancement in the work level. Such performance can either be organizational, individual or group performance. Researchersalso evaluated that the performance-based rewards are not just confined to financial rewards because sometimes non-financial rewards can also substitute for pay. Recognition is one suchfine example of non-financial rewards (Marsh, 2009).Gaining competitive advantage and equity is one of the most important reasons for acknowledging performance-based pay mechanisms. Researchers evaluated various factors for which the company’s management shall install performance-based pay like facilitating selection and hiring, alteration in company’s culture, exhaust trade unions, enhance the function of line manager, improve financial control and create higher value for money, allow for incentives and non-material rewards like recognition, and enhancing ductility. Performance-based pay can be classified as incentive pay or monetary rewards and merit pay.Incentive pay is when the compensation depends on the organizational performance factor like ROI, quantity of goods manufactured or sold, earning or share while merit pay is a type of compensation where the individual performance is assessed and the previous pay along with the increment earned becomes the revised pay for the employees. There are numerous types of incentive pay systems while only one type of merit pay systems. Incentive pay plans can be broadly classified into 3 categories-1. Collective bonus schemes2. Collective bonus schemes based on generated profits3. Individual bonus schemesThe report lays entire emphasis on merit pay and its influence. The analysis of contingent payfor public managers was one of the first opinions of the influences of merit pay formats. Individual contingent pay formats which denoted increments in performance-based pay were the opinions confined to various research works. No positive results were identified in such research. It was ascertained that merit pay in the public sector was not backed up by the sufficient evidences and it was influenced by information asymmetries and invalid contracts (Peirson et. al, 2015). The managers also were not aware of the employees’ performance and lacked interdependence as well. Both private and public sector were analysed by the NationalResearch Council (NRC) in the United States on performance pay. It was ascertained from, such analysis that the employees are instilled with motivation, enthusiasm and perform better if there are legitimate incentive plans. It was concluded that such schemes can be successfully4
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