Impact of Individual Performance Related Pay on Workforce Performance

This essay discusses the impact of individual performance related pay on the performance of the workforce in an organization. It explores various factors such as rewards and awards in terms of money, individual incentive plans, and merit pay plans. The essay also highlights the circumstances in which individual performance related pay tends to motivate employees. Overall, it emphasizes the importance of performance-related pay in increasing efficiency, quality, and productivity in the organization.

STRATEGIC HUMAN
RESOURCE MANAGMENT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Individual Performance Related Pay Impact on Performance of Workforce..................................3
Rewards and Awards in Terms of Money...................................................................................3
Individual Incentive Plans:..........................................................................................................4
Merit Pay Plans............................................................................................................................4
Circumstances of IPRP tends for motivation: -...............................................................................5
IPRP tends to motivate employee: -................................................................................................5
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Individual performance related pay refer to a system in which organization provide wages
according to quality, efficiency and productivity of employees. Essay highlight importance of
performance related pay in the organization and way in which this can be processed. It also
describes IPRP impact on performance of workforce in the organization. IPRP depends on
various factors such as type of occupation, standard of income and values in a country and
individual differences. There are numbers of benefits of Individual performance related pay as
motivate employees in various circumstance to remain motivate and hence increase output of the
organization. However, this factor cannot work well in some situation as described in the essay.
MAIN BODY
Individual Performance Related Pay Impact on Performance of Workforce
Performance related pay motivate employees for achieving for higher goals for example
if employee pay extra by the organization for good performance then it motivate him to continue
do so and encourage others too. There are many ways in which IPRP perform in the organization
such as Rewards and awards in terms of money, Individual Incentive Plans, Merit Pay Plans, and
Group Incentive plans.
Rewards and Awards in Terms of Money
Employee’s yearly, monthly, quarterly and half yearly performance recorded by Human
Resource Department in the organization. This performance depends on various parameters such
as quality of work, quantity and efficiency and according to data is analyse by HR (Bano, 2018).
This recorded data is compare with different workers and an average work performance is set
and above that performance of employee is include in separate list. This list is letter send to
seniors for awards, rewards and recognition. There are multiple tools, from which this
performance is tally such as KPI, 360 Degree feedback etc and hence this enables HRM to select
deserving candidate. According awards and rewards in terms of money distributed by seniors to
employees. It impact on personal growth of the employees and hence increases their financial
capacity of the employee. Build a strong relationship between employee and organization as they
are rightly appraised and decrease chances of migration of skilled and talented workforce from
the organization. It also increases loyalty, efficiency, quality and productivity of the employees.
It also impact on performance of other employees as it encourage them to work harder to get
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awards and rewards. This system increase efficiency, quality and productivity of the employees
and hence impact on growth of the organization. Increase financial capacity of employees
decrease chances of depression and isolation and hence company can achieve higher goals with
effective human resource (Brown, 2020).
Individual Incentive Plans:
Individual incentive plans again motivate for achieving higher goals. In this HRM of the
organization record daily and monthly work of the employees and set an average work time and
quantity. Above that performance of employee will recorded in another list and hence according
to performance individual employee incentive is paid. This list is analysed and latter on transfer
to accounts department with each individual incentive is mentioned and hence company is able
to pay higher to deserving candidate. There are many factors in the report are noted for example
quantity of work, quality, comments of clients or feedback etc of employee and hence this factor
will help in if the employee is progresses in right direction. For instance if the employee has high
quantity of the work but do not match quality standards then it effect on customer satisfaction
level. By Analysing this factors HRM is able to provide proper training and development
programs to declining performance of employees and give incentives to increasing performance
employee. This incentive system encourages and motivates other workers to perform hard and
achieve higher goals in the organization. Incentives depend on occupation of the employee for
example if worker is on senior position then incentive will be higher and on the other hand lower
level of employee will have less incentive. It also depends on standards of income and values in
the country for example UK Pound is higher than Indian rupees and hence a person on the same
post in UK will get higher incentives (Singh and Mishra 2016). Incentive plans support
employee being financial well and hence increase quality, efficiency and productivity of the
organization. It also attracts or encourages performing high to get incentives. It also encourages
workforce performance in the organization and hence company is able to achieve higher goals on
the time and increase customer satisfaction level.
Merit Pay Plans
Merit Pay Plans are used in large private sector organization and focused on managerial
and professional jobs. Merit grid is one of Merit pay plan and in this manager pay increases
according performance of the employee in the organization. Management by objective (MBO)
format is in which worker and supervisor collective deice yearly job objective and it depends on
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quantity and quality of the work. If the employee matches with standard of work then he will get
extra or increment in the salary. However, Human resource department plays important role in
this by performance analysis of the employee and check quantity and quality standard. This
analysis gives details of performance related to employee and transferred to supervisor and hence
according to combine effort of HRM and Supervisor, accounts department pay higher to
employee. Merit Pay Plans encourage participation of the employee too and hence it increase
team participation nature of the employee. It impact on financial growth of the employee in the
organization as well as attract other workers to do and hence increase quality, efficiency and
productivity of the organization (Wass, 2019). It is limited with big organization and concerned
with professional and management employee so its scope is limited to specific area. However, it
play significant role in growth of the organization as it encourage all professional and
management in the organization. It decreases clashes between supervisors and employee as both
participate in yearly objective framing of the organisation. Overall it increase efficiency, quality,
loyalty, team spirit and productivity of the workforce in the organization and hence company
able to achieve higher goals timely.
Circumstances of IPRP tends for motivation: -
Performance related Pay: - Performance related to pay refer to the pay a company give to an
individual and team in return to the work they did for their company. It is known as salary or
wages.
IPRP (Individual performance related pay): - Individual performance related pay refers to the
salary or wages a company give to an employee for the work done by him for the company. It is
the return of the input he did in the company (Boselie,2016).
IPRP tends to motivate employee: -
IPRP helps in the motivation to the individual and employee as it helps in the mind sets of the
employee and gives a better motivation as the better pay gives employee relief and make them
feel important for the company and getting appraisal and rewards help the employee gets
motivated to do more of the work with better quality. Performance policies are made to motivate
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the employee or individual to do better work and company make more policies to acknowledge
the working of an individual and praise them with rewards and gifts which make the employee
loyal and rely on company for longer period.
Why it is important: -
Worker Motivation: - It motivates the performance of the worker as it is important to
acknowledge thew working of the employee and make them feel connected with the company so
that they enjoy their working and can also make sure that the company is putting efforts to make
the individual remain in the company for a longer period. It motivates as the better pay for
performance increase the capability of the worker in doing better work and get paid for that and
this thing increase the motivation for other individual workers also as they start working good
after seeing the pay gets better. If the worker signifies that working better will improve the pay
than every individual will try to make the best of the resources and do the perfect work to get
better payment for the performance they did for the company.
Retaining top talent: - It is important for the company to retain the best individuals in the
company for a longer period as it is important for them as they work better from other employee
and to retain the best employee the company make policies and give other rewards and appraisal
to retain those employee for a longer period in the company.
Circumstances in which IPRP works best: -
The circumstances in which the IPRP work best is when an individual is in need of the financial
support than the employee will work the best of his efforts to make the work perfect and gets the
company in better performance and in return the company pay a good amount for the
performance the individual did to get the pay improve. It works on the process in which both the
company and individual understand the importance of each other as it is important to understand
the value of the employee working and company should promote those individual who work
better and should focus on retain them, on other hand the individual should understand that
working good will improve in the salary and wages and in better payments. If individual gets
good pay they will work better and help the company in achieving the goals of their business and
if the performance is good and the pay is not good then it will affect the performance of the
individual(Boxall,2018).
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The issues of an individual: -
Type of occupation: - The performance pay depends on the occupation of the individual as what
is the occupation an individual have and what type of job he is working in. it is important to
understand the occupation as every occupation have different pays in the market on the basis of
the importance of the working for the company. It needs to understand that the occupation of the
individual play’s important role as if the individual is a leader in the company then the working
is different and the pay will be according to the occupation.
Standard of income and values: - Standard of income and values are a point which affect the
individual as the income is important part of the lifecycle to live a good live and the values are
the ways in which a individual spend and motivates itself for something which is precious to
them. If there is income of the individual and if the individual seeks an opportunity to work
better and get more of the income than this is something which is motivating the employee and
individual to work more for itself in better performance and get a better pay for that.
Individual differences: - Individual differences refer to those issues the individual face in the
workplace regarding the values of the individual and the income differences in the individuals
can affect the working of the employee in the motivation as every person want the equal rights
and the pay and salary for the performance they did for the company should be not judge on the
personal differences and should admire both the individual on same(Rankin,2019).
CONCLUSION
The important of the Strategic HRM is important and the report conclude that it is important for
the HRM to understand the importance of the individual performance related pay as if a
employee is working hard than it is the right of the company to provide a better pay and the
HRM will help them in doing so. The report conclude further about how the individual gets
motivated and the motivation is an important part and if the employee or individual gets good
pay for the performance it will improve in the performance of other employee and will help the
company in getting the business goals better and the result what this company is
demanding(Lengnick-Hall,2019).
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REFERENCES
Books and Journals
Bano, A., 2018. Individual Performance Related to Pay and Motivation. Available at SSRN
3129568.
Boselie, P., 2016. Strategic HRM. In Encyclopedia of human resource management. Edward
Elgar Publishing Limited.
Boxall, P., 2018. The development of strategic HRM: Reflections on a 30-year journey. Labour
& Industry: a journal of the social and economic relations of work. 28(1).
pp.21-30.
Brown, D., 2020. ‘We Are All in This Together’. Collective Bonuses and Incentives in the
United Kingdom and Europe: The Real Performance-Related Pay?.
Compensation & Benefits Review.p.0886368720947328.
Lengnick-Hall and et.al., 2019. Something old, something new: Reframing the integration of
social capital into strategic HRM research. Academy of Management
Perspectives, (ja).
Rankin, S. and Sherer, P.D., 2019, July. Is Strategic HRM Losing Its Way-and Possibly Its
Identity? A Social Network Perspective. In Academy of Management
Proceedings (Vol. 2019, No. 1, p. 15157). Briarcliff Manor, NY 10510:
Academy of Management.
Singh, P. and Mishra, R.K., 2016. Determinants and impact of performance-related pay
perception. Compensation & Benefits Review.48.(3-4).pp.66-80.
Wass, V., 2019. Personnel economics: managing human resources through performance-related
pay. In Elgar Introduction to Theories of Human Resources and
Employment Relations. Edward Elgar Publishing.
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