Strategic Human Resource Management: Individual Performance Related Pay

This document explores the extent to which individual performance related pay can stimulate higher levels of performance from employees. It discusses the circumstances in which it tends to motivate employees and why, as well as when it may not work as well. The document also provides insights into strategic human resource management and its impact on company goals.

Strategic Human Resource
Management project 1

Table of Contents
INTRODUCTION...........................................................................................................................1
ASSESSMENT TASK....................................................................................................................1
critically evaluate the extent to which individual performance related pay can stimulate
higher levels of performance from employee..............................................................................1
what circumstances IPRP tends to motivate employees and why, and in what circumstances it
tends not to work so well and why..............................................................................................3
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
Strategic human resource management is designed to help companies best meet the needs of
their employees while promoting company goals. It is being used to enhance performance level
of company and also an innovative culture is being established because of it. SHRM assists an
organisation to gain competitive advantage. SHRM can also affect the process of recruitment and
selection in firm. They make sure that adequate knowledge is been provided to employees who
are working in organisation. Present report will lay emphasis on critically evaluate the extent to
which individual performance related pay can stimulate higher levels of performance from
employees. It will also analyse about how IPRP tends to motivate employees and why, and in
what circumstances it tends not to work so well and why.
ASSESSMENT TASK
critically evaluate the extent to which individual performance related pay can stimulate higher
levels of performance from employee
Individual performance related pay can be considered as a reward system that can be used as
a motivational aspect for employees so that they can grow. In this rewards are being paid on
basis of performance of workers. This scheme motivates employees in various circumstances. It
has been analysed that several organisations are been working in dynamic environment and they
want to survive in changing situation. So for them this method is considered best for
development of employees (Wang and Wang, 2017). This can also assist firms in increasing
level of performance of workers and because of this can they can also be able to gain competitive
advantage. It has been analysed that in order to motivate employees through this system, they
need to set objective in a way which is achievable. They will be de-motivated if goal is too hard
to be achieved. Performance related pay provides individual employees with financial rewards
based on their performance. It can be in the form of bonus, appraisals, sales commission. This
pay system can assist in enhancing productivity and managerial efficiency. It can be used for
growth of business and through this system employee loyalty can also be created. The business
will be able to achieve their set target and objectives because of this. A good PRP system can
support employees to focus on what they need to improve. This will also implement equality in
organisation as workers will be pay on basis of their work, ultimately increasing good will of
firm. It will also increase performance level of organisation that can develop competitive and
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better environment in an organisation. This can also assist firm in attracting large number of
employees which are highly skilled and talented towards them.
Rewarding employees on the basis of their performance in financial terms can also assist
organisations in retaining them. This can assist firm in growing and also by this they will be able
to extend their business. It is a method of compensation which can allow business to grow and
also it can assist in increasing the efficiency as well as productivity of business. They also make
sure that through performance related pay employees stay motivated and they are also being able
to increase satisfaction level of their jobs (Sundström, 2019). Performance based pay can link to
overall success of company and it makes environment of firm competitive. Individual performs
their best to pay more amount of money and also this can increase employee belongingness
which is really necessary for growth of organisation. This pay system can assist company in
increasing psychological as well as basic needs of employees. It is one of the most common way
which can be used so that motivation level of workers working in organisation can be increased.
It has also been analysed that PRP can also support various business in achieving their set target
and mission. They can also be achieving and increase profitability as well as revenue which is
really necessary for growth of firm. It has also been analysed that satisfied and motivated
employees can also assist organisation in increasing their sales related to good and services.
They can ultimately increase revenue and also organisation will be able to increase and expand
their business because of it (Pompei, Damiani and Ricci, 2019).
Performance related pay can also assist workers and team members in staying motivated and
because of this, they will work more precisely which can also reduce errors that has been made
by them. It has also been analysed that this can also support organisation in increasing employee
engagement towards firm which is really necessary for organisation growth. It will also assist in
increasing productivity as well as managerial efficiency of business. This can also assist business
in solving their problems as employees will be more concern towards work and they will come
up with innovative solutions to issues. This can support organisation in growing and it can also
support them in achieving their set target as well as mission. Performance related pay can also
support various business in increasing confidence as well as self-esteem. There are various types
of incentives that can increase motivation level of employees such as bonus, appraisals,
vouchers. It has also been evaluated that these are the strategies which are being used by so many
organisations in order to increase motivation level and satisfaction level of employees. This can
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help in reaching out the ultimate productivity level and by these workers can also be able to
reach out their personal as well as professional goals. Performance based pay can assist in
making employees feel appreciated. By this they can have a feeling of recognition and also this
can increase employee’s engagement towards work. Individual performance can also be
increased because of this (Konings and et.al., 2016). It can support organisation in increasing
their efficiency as employees will be able to work better. It has also been analysed that this can
assist business. in growing and also they will be able to achieve their set target and mission. By
this performance of employees are been acknowledged by employers. This can also improve
employee-employee relationship and can assist business in growing.
what circumstances IPRP tends to motivate employees and why, and in what circumstances it
tends not to work so well and why
Individual performance related pay tends to motivate employees so that their performance
level increases and competitive advantage is also been gained by them. This system assists
employees to work harder and by this they will also perform better. There are also various
contextual issues which can be faced when business is making use of IPRP (Koskinen Sandberg,
2017). It has also been said that in order to increase productivity level, it is really necessary that
stays motivated and this can be done by paying individual on basis of their performance. This
can assist firm in growing and also it can help them in expanding their business and achieving set
target and objectives. It has also been analysed that motivated employees stay longer in
organisation and also they can assist business in bringing out innovative solutions to problems.
This can also help company in increasing their good will and they will also be able to attract
talented and more efficient employees. When rewards are being provided by employer on basis
of performance, this also assists them in building relationship. This will assist them in retaining
workers and also employee engagement can also be created through it. Individual performance
related pay can be used in a situation where the labour turnover is being increasing. It can also be
used in a situation where company wants employee loyalty. This strategy can assist in
development of company and it can also allow them in growing and expanding their business
(Isimoya, Olajide and Onafalujo, 2018).
It has been analysed that performance based pay not provides lasting commitment, they are
only temporarily. There are chances that even after getting more pay employees can follow back
their normal routine, so this can act as threat for organisation. Studies has found out the negative
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correlation between pay and performance. Many managers understand that coercion and fear
destroy motivation and create defiance, defensiveness, and rage. It has also been analysed that
many organisations have also faced situation of conflict as some of employees are paid more and
some less and this has created differences between employees which ultimately has made the
environment of firm worse. It has affected growth of organisation and culture of company has
been hampered because of this. Conflict has also been created when there are differences in
employees and this can affect growth of organisation.
There are various contextual issues because of which performance based pay is not as
effective as it seems. It has been analysed and has been published in human resource journals
that workers who receive performance based pay works harder and are engaged in company but
this increases their stress level and also their job satisfaction is been decreased because of this.
Type of occupation: Percentile wages show how workers' pay varies. The reason that
some countries provide some employees more than the other even if they are being placed at
same level. There can be various reasons about their can be difference in performance related
pay. It has also been evaluated that some workers are been paid more because they are working
in that job for quite some time and has more skills and experience then the employees who has
newly joined. Occupational performance based can also vary by company and employer.
Training requirements and diverse working conditions can be one of the major reason about why
performance based pay can differ. It has also been analysed that jobs provided can be on similar
position but can differ task wise so there are chances that company might follow pay differences.
Some employees can get paid more based on their work even if they are on same position
The standard of income and values in a country: the difference in pay can be because
of geographic location. It has been analysed that Some countries or areas have higher wages than
others for jobs in an occupation. Local demand for the work and cost of living are among the
geographic factors affecting wages and also the performance based pay (De Spiegelaere, Van
Gyes and Van Hootegem, 2018).
Individual differences: It has been analysed that the performance based pay creates
individual difference between employees. They can feel jealous of each other and also they can
become stressed about one employee is getting pay more and one is paid less. This can increase
frustration and stressed level can also be increase. This can give rise to conflict in organisation
and firms environment can hamper because of it. It can also become a major reason of increase
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in employee turnover. So better strategies need to be made by organisation before making use of
individual performance related pay scheme. This can assist business in reducing down the
employee turnover that can be created because of individual difference.
CONCLUSION
From the above study it has been summarised that individual performance related pay has
assisted various business in increasing motivation and performance level of employees. This has
supported them in gaining competitive advantage. It has also been analysed that because of PRP
workers job satisfaction has also been increased. It has assisted company in achieving their set
target as well as mission. They have also been able to increase their sales as well as revenue
because of this. It has also been analysed that employee turnover has been reduced because of
being paid more for the work. This has also supported business in creating employee loyalty.
It has also been analysed that there have been various issues related to individual
performance based pay. It has been evaluated that in some areas employees are been paid in
comparison to other. It has also been analysed that there has been an increase in individual
differences because of performance based pay. This has also assisted in increasing conflict in
firm. It has been analysed that performance related pay has also increase stressed of workers as
they now have to perform better.
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REFERENCES
Books and Journals
De Spiegelaere, S., Van Gyes, G. and Van Hootegem, G., 2018. Innovative work behaviour and
performance-related pay: rewarding the individual or the collective?. The International
Journal of Human Resource Management, 29(12), pp.1900-1919.
Isimoya, O.A., Olajide, O.T. and Onafalujo, A.K., 2018. Performance Related Pay and
Organizational Commitment–evidence from Nigeria. Journal of Economics &
Management, 34, pp.58-80.
Konings, J. and et.al., 2016. Performance related pay, productivity and wages in Italy: a quantile
regression approach. International Journal of Manpower.
Koskinen Sandberg, P., 2017. Intertwining gender inequalities and gender‐neutral legitimacy in
job evaluation and performance‐related pay. Gender, Work & Organization, 24(2),
pp.156-170.
Pompei, F., Damiani, M. and Ricci, A., 2019. Family firms, performance-related pay, and the
great crisis: evidence from the Italian case. Industrial and Corporate Change, 28(5),
pp.1193-1225.
Sundström, A., 2019. Exploring performance-related pay as an anticorruption tool. Studies in
Comparative International Development, 54(1), pp.1-18.
Wang, Z. and Wang, H., 2017. Probabilistic modeling of performance-related pay adjustment for
in-place air-void contents of asphalt pavements. Journal of Infrastructure
Systems, 23(2), p.04016033.
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