Performance Related Pay Briefing

This document provides a briefing on performance related pay, including an overview of the reward system and its variations, advantages and disadvantages, budgeting considerations, and examples. It also discusses the reasons for implementing this reward system, such as increasing productivity and retaining employees.

PERFORMANCE RELATED
PAY BRIEFING
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TABLE OF CONTENTS
MAIN BODY...................................................................................................................................3
REFERENCES................................................................................................................................5
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MAIN BODY
Overview of reward system and its variation
Performance related pay is basically the financial reward which is given to the employees
whose work has achieved the requited standards. This type of reward system is generally taken
into account when the performance of employees cannot be measured in terms of the output
produced by them. The most common variation in this reward system is individual incentive
plans, merit pay system and Group incentive plans.
Advantage of reward system
The biggest advantage of this reward system to TESCO is that it will help the
organization to motivate employees. When employees will realize that their performance has
monetary value then they will work with more enthusiasm and thus will be motivated. Another
advantage is that it will increase the productivity of employees for work as in the greed of money
they will work harder (White, 2016).
Motivational needs
The performance related reward system fulfills the psychological need of an individual
which call for having money to access the basic necessities like food, clothes etc. In addition to
the psychological needs, this reward system also fulfills security as well as safety needs of the
employees. Employee requires money for securing their life and wants job security thus it
satisfies their security needs. Besides this, individuals wants a recognition in society and high
prestige thus it also fulfills social needs.
Disadvantage of reward system
The major disadvantage of this reward system is that it leads to the hindrance of team
wok as well as cooperation as employees gets frustrated when one team member receives the pay
while others do not. This often leads to conflict among them. Another disadvantage is that
implementing and thus formulating this reward system sometimes becomes expensive for the
company as it requires high amount of investment (Gilman, 2016).
Budgeting considerations
There are various budgeting consideration which TESCO should consider while planning
the performance related pay. For example the number of hours which the employees are working
in the company. Besides this, other internal factors are considered while designing the
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performance related pay like base pay of the employees, expenses of their communication and
other benefits.
Internal and external factors affecting reward system
The most important internal factor which might affect the implementation of this reward
system is the compensation policy of TESCO. The pay policy of the company regarding pay
helps in determining the pay structure. Another external factor which might impact its
formulation is the economic conditions of country. When economy of country is high and better
than organization have the provision to design good performance related pay.
Example of reward system
The most common example which can be explained for implementing this reward system
in TESCO is achievement of sales. For example The sales team was given target to increase the
sale of product by 20% in one month. An employee within the team achieved the target before
termination of one month and during the whole one month also exhibited positive attitude and
guided other team members. Then to continuously motivate the employee, company will provide
performance related pay in monetary terms. Thus, in this way organization implement this
reward system (Wood, 2016).
Summary of reasons for implementing this reward system
The main reason for adopting this reward system is that it helps to increase productivity
and performance of employees. When employees find out that they will receive monetary benefit
for good performance then automatically they will be more committed toward work. Another
reason is that it helps in retaining employees. When employees will be highly satisfied and will
be motivated then they will want to stay with the company.
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REFERENCES
Books & Journals
Gilman, M., 2016. Profit-related pay/gainsharing. In Encyclopedia of Human Resource
Management. Edward Elgar Publishing Limited.
White, G., 2016. Performance-related pay. In Encyclopedia of Human Resource Management.
Edward Elgar Publishing Limited.
Wood, S., 2016. High-involvement management. In Encyclopedia of Human Resource
Management. Edward Elgar Publishing Limited.
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