Benefits and Disadvantages of Performance Related Pay and Differences between Soft and Hard HRM Approaches

Question 4: Discuss the benefits and disadvantages of Performance Related Pay. Consider
in your discussion the key assumptions about human motivation that is at the heart of this
practice.
Performance related pay (PRP) is a method which is mainly used by the company and it is a
method of remuneration that provides individuals in term of financial rewards that helps to
increase their basic pay and it is also related to assessment of performance that is also agreed by
the objectives. Further, it is a kind of an incentive that helps to increase the employee
performance. It can be also stated that with the help of performance related pay, company can
reinforce the existing culture and this might affect the results in positive manner as well. That is
why, it is a type of motivation strategy which is used by top businesses with an aim to improve
the performance and meet the defined aim of a company as well. Overall, it is a method for
encouraging good performance and also prevent employee to increase their wages because they
get this amount in the form of extra pay which is not counted under salary but a sense of
motivation increases.
Advantage:
 With the help of PRP, company gives a manager and workers an incentive that helps to
improve the efficiency and productivity. This in turn assists to lower the cost and also aid
business to lower to increase the profit. This in turn also assists to improve the
performance of employees because employees automatically get motivated as they earn
financial benefits regarding the same.
 PRP also improve the worker’s morale and loyalty, if they feel any hard during their
work which is rewarded. Thus, it assists to generate a sense of belongingness among
employees so that they attain the defined aim of a company. There are many situation,
where employees feel demotivated and that is why, there is a need to opt such strategy by
HR of a company that contribute to motivation and raise the performance of an employee
as well.
 Employee engagement is another benefit which is attained by using PRP within a
company because offering financial rewards to their employees always sustain a better
and long term relationship for the employees. It is human nature because once human get

any benefits regarding to financial term then it always assists to engage with a firm for a
longer term.
 Reducing turnover is another key benefit of implementing PRP within a business because
in this era, retaining employees for a longer term is quite difficult and that is why, there is
a need to increase pay and offer extra benefits to employees as well.
 Better recruiting is another advantage of using this method because it always helps the
business to improve the results in positive manner and this might improve the
performance of an employee’s towards a positive manner.
 In addition to this, Performance related pay also change the role and working patter of
supervisor because it always helps the employees to make decision and motivates them as
well. That is why, there is a need to use this method because it helps to improve the
business performance and sustain the brand image of company as well.
Disadvantage:
 Sometimes, using this method might cause negative impact over the business because this
might demotivate other employees who do not get any advantage regarding the same.
This also affect their performance within a company and that is why, it might affect the
performance of a company.
 If the culture of a company becomes too competitive then the morale of employees
affected in negative manner. That is why, it affected the business environment in negative
manner as well. This also affect the employee performance because working in negative
environment becomes too tough within a business and this might cause adverse impact as
well.
 Most of the employees might expected more payment for work and performance beyond
their goals and this might hamper the results as well. That is why, most of the top
business do not use this method because its drawback affects the results adversely.
 Employees might be focus upon the rewards instead of attaining the goals and this always
affected the results adversely. This negative behaviour towards working always affect the
business performance and their pattern of working as well.