BUS 3007 - Individual Performance Related Pay and Job Performance

This essay explores the extent to which Individual Performance Related Pay (IPRP) can enhance employee performance, examining the circumstances under which it motivates employees and when it proves ineffective. It discusses the advantages of IPRP, such as increased motivation, productivity, and reduced employee turnover, while also addressing potential drawbacks like unfair pay distribution, stress, and demotivation due to perceived inequities. The essay further analyzes how factors like equity, reward size, and the nature of the reward system influence the success of IPRP, concluding that effective management and fair implementation are crucial for maximizing its positive impact on employee performance. Desklib offers a platform for students to access similar solved assignments and past papers.

BUS 3007 HR

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Evaluate to which extent IPRP can bring high level of employee performance.........................1
Circumstances in which IPRP motivate employees and when it do not work well.....................3
CONCLUSION................................................................................................................................5
REFERENCE...................................................................................................................................6

INTRODUCTION
Individual performance related pay has become more important in today's ear and also it is more
used in modern organisation. Basically it is the rewards in the form of money which is given to
the employees on the basis of their performance. This essay will discuss Individual performance
related pay bring higher job performance and the circumstances under which it will work and it
wont work.
MAIN BODY
Evaluate to which extent IPRP can bring high level of employee performance.
Individual performance related pay-
it refers to the method of remuneration which is given to the employee or individual by
providing financial rewards in the manner of increasing basic pay or providing them bonuses in
the form of cash which helps in improving performance of an individual. Employees are
motivated by providing them financial rewards so that their goals can get achieved (Minasyan
and et.al., 2017). As per IPRP company should have pay their employees as per their
performance. As there are various companies which do not pay employees as per their
performance and often pay low to the workers. It is ethically not correct.
This system has increased in the past recent years especially is has increased in the
manufacturing sector. Company gives monetary reward to those employees which have worked
hard to achieve the objectives of the company. Before giving them rewards employees are
monitored on the set standards. Motivation helps in enhancing job performance. Satisfying
employees are not easy and management face this problem a lot as every employee have
different values, attitudes, behaviour etc. motivation are of two types which is intrinsic and
extrinsic motivation. Intrinsic means which comes from inside and is the internal motivation and
extrinsic is the external motivation.
Employee motivation is essential if company wanted to achieve their overall objectives.
Motivated employee will work in every tough situation because they know that company will
give them rewards. Sometimes they won't give up because they think that company have trusted
them and they will be never let them down (Wass, 2019). So that is why employees uses their
knowledge, education and skills so that company goals can be achieved. Designing and
implementing reward system is not very easy. Majority of the company believes that if they will
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increase the salary of their employees then that will automatically increase their motivate level
and their level of productivity.
There are many evidence present which says that performance related pay helps in getting
improved performance by their employees. It further helpful in improving the productivity of the
workforces. But the advantage of this thing varied on the nature of scheme which is provided by
the company. Manager should have opt for appreciating or rewarding employees for their
individual efforts and not for their group performance. As there are high possibility that all the
people in the group do not carry given tasks. There are only few people which contribute in
completing whole task (Koskinen Sandberg, 2017). So that is it will be better to appreciate
individual efforts only. Management of the company knows it very well that motivated and
productive workforce are necessary if the company wanted to achieve success or growth despite
of their sector, size, strategy etc. in order to motivate employees providing them performance
related incentive pay is best option. There are many times when this method backfire as there are
various times when employee complaints for unfair pay distribution which leads to stress among
employees.
These pay schemes can also affect employee well being, if they will take scheme in wrong
manner. It can be said that performance related pay is concerned with job satisfaction, trust,
organisational commitment etc. when employee will get something extra in the form of pay then
they work hard so that they can obtain individual reward. Performance related pay is the good
option to motivate employees for performing good. As it correctly said that when employee will
get additional, benefits the they tend to perform better. As financial rewards is the biggest
motivation. In order to improve the performance of the employees many organisation have
replaced the concept of fixed pay with the variable pay. Company have started performance
related pay because they want to motivate their workers and also increasing their attachment
with the company. Hence it will help in reducing employee turnover rate and also the rate of
absenteeism. Paying employees more on the basis of their performance can be seen more in
private sector and also with skilled employees.
There are some research which says that performance related pay is the unnecessary expense for
the company (Georgantzis, Vasileiou and Kotzaivazoglou, 2017). There are various other things
also which can motivate employees despite giving them monetary benefits. If manager will
appreciate employees for their good performance then also they will get motivated. Often those
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employees which do not get incentive, demotivate and that affect their level of productivity.
Many employees even feels that company is not treating everyone equal and this can result to
more staff turnover. Performance pay enhance performance and employees also focuses on
attaining goals or objectives in any manner. Pay and recognition to the employees create happy
working environment. Paying extra to the employees is the biggest motivator but moreover
when employee thinks that company is valuing them because they have providing them
incentives tend to motivate them more. Extra do not only motivate employees but it also
increases moral of the worker. It boosts employee loyalty, employee loyalty cannot be purchased
but it is gained. Loyal employees are also the highly committed employees. When employees are
paid over good performance then they think that company values their work and also this retain
employees (Ogbonnaya, Daniels and Nielsen, 2017).
Retaining talented workforce is also important. When company will retain their talented
employees then they can achieve success easily. As existing employees have developed skills
which are required to attain objectives effectively and efficiently. Performance related pay is
given to those employees which have achieved specific targets. The aim behind this is to inspire
employees so that they work hard on achieving company goals. If company will achieve their
goals on time then they can attain competitive advantages. Incentives are associated with the
targets which results in more achievements and productivity. Performance pay is helpful in
making employees happy because it foster the productivity of employees.
It also decreases employee turnover and when less employees will leave the organisation then
the costs of the company in recruiting and provide training to new employees will also gets
decreased (Lazazzara, Della Torre and Nacamulli, 2020). Company should have retain or attract
high performer employees because they are the asset to the company. It also brings the feeling of
teamwork. When group of employees work together to achieve particular targets is good for the
growth of the company. As teamwork brings harmony and collaboration at the workplace. When
employees work in a team then that helps in improving performance of the employees.
Circumstances in which IPRP motivate employees and when it do not work well.
IPRP motivate employees in those circumstances where equity and efficiency is taken into
consideration (Zhang and et.al., 2021). Motivation and efficiency of the workforce can be
purchased by the company if they will pay financial incentives to their employees in equal and
efficient manner. If company will give importance to equally then employees will get motivated
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because they will think that all of them are equally considered by their organisation. When all of
them are treated equally then they tend to achieve high standard of performance. This withdraw
every factor of demotivation. So that is why reward system is managed and executed in proper
and efficient manner so considering their employees needs. Rewards are of two types which is
financial based rewards and non financial based rewards. Financial rewards are the highly
visible rewards.
There are several companies which does not disclose the amount of compensation but when
company will disclose the amount of incentive or reward then it will motivate employees
because they will have knowledge that company is providing fair incentive and will also wait for
the particular rewards. If companies are providing non financial rewards then should be also
publicise because that will inform employees that company is treating everyone equally and
fairly. Reward system should have also get reversed timely so that the same person in the
company will not get received rewards every time (Spano and Monfardini, 2018). If everytime
same employee will take all reward then other employee will not put hard work or efforts and
they will get demotivated.
Situations in which IPRP do not work-
in those organisation where employees tend to have small salary. Then it takes lot of time in
ranking employees which has contributed more in the company in attaining goals. This can even
result to high level of disappointment. Performance related pay even results in disappoint at
various areas. Reward size is one of the important factor which needed to be consider before
bringing back the performance related pay system. Employees which are putting lots of efforts
and at the end of day they are getting very less increase in their pay tend to demotivate more and
in various situation they also quit their jobs. Due to this company even lost their high performer
workforce. There are many companies which have different reward systems for the managers
and the employees often it shows discrimination (Zhang and et.al., 2017).
It differs from company to company. Senior managers have different reward system and junior
manager have different reward system. In today's world rewards plays more vital role because
organisation have flat organisational structure and employees are always existed to get rewards.
Rewards are compared with the lottery system where the chances of winning it are less but still
more people take participation. When the inflation is low than employee will not be able to feel
any differences in their salaries but when the inflation rate is high then employee will tend to see
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more differences in their salary. It is challenging when differences has to make because of lower
budgets over wages. Hence effective management gets substituted for performance related pay.
Such problem takes place or increases when managers thinks that performance related pay and
effective management is similar only.
In those circumstance also it so not work where the reward system is not efficient enough and
the right people have not gets rewarded (Maltarich and et.al., 2017). In most of the cases the
efficient employees have been given more workloads or loaded with work and poor performers
are not even pressurise to work and they have easily get time off. This thing can bring
demotivation and also brings poor performance. If poor performer will not give work then they
will never get improved.
Another situation in which IPRP do not work properly where duties of all the employees are
inter linked with each other. Then it became challenge to know that specific contribution which
is given by the specific employee. If an employee is appointed Sloley to separate work then it
will become time consuming process and also consumes lot of resources. It will become
unnecessary expense for the company (Na and et.al., 2019). Here employees do not have control
over the outcome as what they have achieved in the form of result is solely dependent on their
colleagues. If thought from the point of view of employees then it is highly dissatisfied and also
highly demotivated. There are also chances can employee has to go through favouritism if they
will not given reward as per company has promised to them. If large number of employees get
demotivated then will also affect the efficiency of the organisation.
CONCLUSION
through this report it can be concluded that it is hard to say that performance related pay will
motivate employees or not. Company do not such reward system which guarantees success.
Report has also discussed about the situation in which IPRP has motivated employees and also
those situations in which it do not able to motivate employees.
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REFERENCE
Books and Journals
Georgantzis, N., Vasileiou, E. and Kotzaivazoglou, I., 2017. Peer norm guesses and self-reported
attitudes towards performance-related pay. PloS one. 12(4), p.e0174724.
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.
Lazazzara, A., Della Torre, E. and Nacamulli, R.C., 2020. Understanding the relationship
between intellectual capital and organizational performance: The role of e-HRM and
performance pay. In Exploring Digital Ecosystems (pp. 151-164). Springer, Cham.
Maltarich, M.A. and et.al., 2017. Pay-for-performance, sometimes: An interdisciplinary
approach to integrating economic rationality with psychological emotion to predict
individual performance. Academy of Management Journal. 60(6), pp.2155-2174.
Minasyan, E.T. and et.al., 2017. Implementing New Performance Pay-Based Schemes in Higher
Educational Institutions. European Journal of Contemporary Education. 6(4), pp.748-
756.
Na, I. and et.al., 2019, July. Pay for (Individual) Performance: A Longitudinal Study of Merit
Pay Plans and Firm Performance. In Academy of Management Proceedings (Vol. 2019,
No. 1, p. 15853). Briarcliff Manor, NY 10510: Academy of Management.
Ogbonnaya, C., Daniels, K. and Nielsen, K., 2017. How incentive pay affects employee
engagement, satisfaction, and trust. Harvard Business Review.
Spano, A. and Monfardini, P., 2018. Performance-related payments in local governments: Do
they improve performance or only increase salary?. International Journal of Public
Administration. 41(4), pp.321-334.
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.
Zhang, X. and et.al., 2017. Design and Implementation of Management System of Performance
Related Pay Based on Cross-Efficiency Evaluation. European Business &
Management. 2(2), p.60.
Zhang, Y. and et.al., 2021. Does pay for individual performance truly undermine employee
creativity? The different moderating roles of vertical and horizontal collectivist
orientations. Human Resource Management.
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