BUS 3007 Report: Stimulating Performance with Individual Pay

This report critically evaluates the extent to which individual performance-related pay (IPRP) can stimulate higher levels of performance from employees. It discusses how IPRP, as a salary system reflecting individual employee performance, can be effective in sales-based environments by incentivizing faster and harder work. The report cites studies supporting the idea that clear links between pay and performance motivate employees, especially when goals are specific and expectations are well-defined. It also explores alternative viewpoints, such as piece-rate pay and merit pay plans, and their respective impacts. Furthermore, the report delves into circumstances where IPRP effectively motivates employees, such as when companies focus on equity and efficiency, and when financial rewards are transparent. Conversely, it addresses situations where IPRP fails to motivate, including resource-focused environments, minimal wage increases, and discriminatory reward systems. The report concludes that IPRP is a crucial component for organizations, influencing employee performance significantly when implemented thoughtfully.

BUS 3007 HR

TABLE OF CONTENT
INTRODUCTION...........................................................................................................................3
Critically evaluating the extent to which individual performance related pay can stimulate
higher levels of performance from employees.............................................................................3
Circumstances IPRP tends to motivate employees and circumstances it tends not to work so
well...............................................................................................................................................5
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Human resource in the business is very important as it used to find, recruit and train the
best employees in the organization. It helps the company to deal with the changes in the macro
and micro environment. Every organization is required to have human resources regardless of the
nature and size of the business. This report will outline that extent to which the individual
performance related pay can stimulate higher levels of performance from employees in the
organization and further it will outline the circumstances in which IPRP motivates employees or
circumstances when it does not motivate and why.
Critically evaluating the extent to which individual performance related pay can stimulate higher
levels of performance from employees
Individual performance related pay is a type of salary system which shows the
progression in the work of individual employee's performance in the company. It is basically
used to evaluate the revenue targets which is based on the sales-based environment. This makes
the employees to do their work faster and harder. This performance pay system basically does
not use well in the office-based environments as no physical item is produced by the employees
at the end of every hour. It is a type of incentive which improves the efficiency and productivity
of the employees.
According to Theofilou and et.al., (2021), individual performance related pay is an
effective system which helps the employees to stimulate their performance. Employees used to
understand the planned performance in order to manufacture the goods. By this they can find out
their capabilities and skills by performing well in per hour. As there is a clear link between the
pay and performance of the employees so it makes the employees to be motivated towards their
work. The setting of goal has the good impact on the employees as they are very specific about
that what they have to produce and manufacture. Taking together the expectations and set goal
the owner can predict that the performance pay plans can be more improved by focusing on the
performance and efforts of the employees towards the company's planned goal. The individual
performance pay is basically depends on the performance of the employees that how they are
working, extra products they are producing in the company and they are working according o the
set plan.
On the other hand Mariappan and Kalidoss (2017), believes that individual performance
pay can be given on the piece rate basis that on every extra piece produced by the employees

they will be given extra pay. This makes the employees to stimulate and enhance their
performance in order to earn more by producing and manufacturing of goods. The performance
of the individual should be checked by the one supervisor as controlling of employees from
many supervisors may them feel demotivated in their work. There should be group incentive
plans in order to check the performance of the work done by the employees. The performance
can be checked on the quantitative basis which can be easier for the supervisors to check the
performance of the employees. By checking they must pay performance pay to the employees.
As per the study, the individual incentive has the great and positive impact on the performance of
the employees. Paying extra on the piece encourage the employees to produce and manufacture
more in order to get more pay from the organizations.
In the opinion of Chairunnisa and Jaelani (2019), it says that the performance pay can be
on the basis of merit pay plans which can be measured on the qualitative and quantitative
performance of the employees. This is important to have good merit plans as it helps the
employees to work on their performance and have good professional jobs. In this basically, the
annual performance of the employees are checked and in order to that the pay is decided by the
company. The pay is also decided by the employees grade, position and individual performance
rating. Professional jobs involves the management by objective system in which the employees
and supervisors decides the objective in order to mange the work in the organization. This makes
the employees to take part in the decision-making. By giving annual wages on the performance it
stimulates the growth of the employees and makes them to do better work in the company.
Somehow this plan does not work as the performance pay is given at the end of the year so
employees cannot wait to pay higher for a year. The company suggest the employees that their
pay will be increases it the understand the goals and create the feeling of trust towards the
company. So it is somehow difficult to work on the qualitative performance rather than working
on the quantitative performance which does not increase the growth of the company.
According to Porheydar and et.al., (2021), it suggests that the individual performance
related pay can be based on the group incentive plans of the organization. By this it increases the
cooperation between the employees of the company in which makes them more effective and
productive towards their work. This plan has major drawback as creates the difficulty in order to
check the individual performances in the organization. By this it makes the employees to pay less
for their performance as they are working in the group to produce more and productive. This

makes the employees demotivated in their work as the organization is not paying them according
to their abilities, skills and talent. Working in the group puts shadows on the work of the
individuals. They can provide bonus to the employees on the basis of their work which motivates
them in order to stimulate the performance of the employees and company as well. The
organization should focus on the individual performance pay of the employees rather than group
pays. IPRP helps the company to increase their production by paying bonus or extra pay to their
employees.
Circumstances IPRP tends to motivate employees and circumstances it tends not to work so well
Individual performance related pay in the firm is the special framework which helps in
enhancing the performance levels of the individuals (Asaari, Desa and Subramaniam, 2019). It
has both direct and indirect impact on the advantages of the organization. It has believed that the
organizational goals can be achieved by improving the abilities, skills, loyalty and morale of the
employees. This is a type of reward given to the employees in order to produce more than their
capability.
Circumstances where individual performance related pay motivate the employees
If the company is paying the employees more than their work helps the employees to get
motivated in their work. This is done where the organization is more focused on the equity and
efficiency of the employees (Ali and Anwar, 2021). The organization can boots-up the work and
motivate the employees and make them energetic in order to pursue the organization objectives
by giving them performance pay as the reward. It makes to distribute the financial reward in the
effective manner. By increasing the equity of the organization it enhances the work of the
employees and makes them feel valued in the company. The gap of demotivation of the
employees will be eliminated by the organization by making them motivated in their work. The
system of reward by the company must be implemented and there should be proper management
of the work which makes them effective and productive in their work.
The great motivation to employees are given through the financial rewards. Some
companies do not show the compensation amount to their employees but those companies who
show makes their employees more potential and effective in their work (Ogbonnaya, Daniels and
Nielsen, 2017). By disclosing the reward pay to the employees it shows the fairness of the
performance pay system and lead to motivate them towards the goal and standards because they
are known that they will be paid extra pay on the extra work.

Some companies cannot give monetary reward system to their employees on behalf of
that they used to give non-monetary rewards to their employees. By giving their employees
flexibility of work, providing them extra day off, providing them training, providing time for
doing volunteer work etc. can motivate the employees in order to increase the productivity of the
company. It keeps the fairness in the environment of the company by providing them non-
monetary rewards on their best performance.
The reward system should be reversible, that means the reward and compensation system
should be structured in such a way that it motivates the every employee of the organization. The
reward given to the one person every time makes the other members demotivated in the company
(Riyanto, Sutrisno and Ali, 2017). So the organization must provide that the rewards must be pay
according to the work and productivity of the employees which makes the every employee
motivated and encouraged in their work. For example, the company is paying bonus to the
specific employees in the particular year, so the company can pay bonus to the other remaining
employees in the coming next year which makes them feel motivated in their work.
Circumstances under which IPRP does not work so well
The organization which are more focused on the resources and ranking the employees in
order to do more work and keeping more expectations from the employees makes the employees
feel demotivated in their work (Performance-related pay: everything you need to know, 2021).
The size of the reward depends on the motivation on the employees. By doing lots of work and
receiving the minimal wages it demotivate the employees and nay have effect on their work.
The reward system in company can be discriminated on the levels of staff. The
companies decide the rewards on the basis of managers and staff which creates the
discrimination in the organization in providing the performance pay to the individuals. This can
also be differentiated when the senior level managers are compensated more from the low level
managers. As now the employees don't tell their rewards so it becomes difficult to know who is
getting more bonus and reward in the organization.
The reward system of the employees also depends on the economic situation of the
company. If the company is having negative economic situation than they are not able to pay the
rewards to their employees in order to increase their performance. When the company is not
earning adequate profit than it makes the employees to not to earn more from the organization. If
the economic situation is high the employees are able to see the growth in their salaries. It is

challenging for the company to give performance pay at the time of adverse situation in the
organization. The main situation arises when the mangers of the organization thinks that the
management and productivity is the same hence no motivation is required to the employees.
If the company is having inefficient reward pay system it gives rewards to the
unproductive employees (How Does Performance Related Pay Motivate Employees?, 2021).
This may demotivate and discourage the performance of the high performance workers in the
company. It may be difficult for the company to differentiate the performance of the individual
workers and pay according to their work. So it makes the employees demotivated and makes
them dissatisfied in their work.
CONCLUSION
From the above study it has evaluated the individual performance related pay is crucial
part for the every organization to follow. They must pay rewards to the employees working and
manufacturing the large units for the company. This performance pay has an ultimate effect on
the performance of the employees. Further it describes the individual performance related pay
should stimulate higher level of performance from employees. At last, it describes the
circumstances which motivates employees that are the reward should be reversible, should be
visible to employees etc. and circumstances which does not motivate employees are that giving
less according to work, discriminating rewards from level of staff etc.

REFERENCES
Books and Journals
Ali, B. J. and Anwar, G., 2021. An Empirical Study of Employees’ Motivation and its Influence
Job Satisfaction. Ali, BJ, & Anwar, G.(2021). An Empirical Study of Employees’
Motivation and its Influence Job Satisfaction. International Journal of Engineering,
Business and Management. 5(2). pp.21-30.
Asaari, M. H. A. H., Desa, N. M. and Subramaniam, L., 2019. Influence of salary, promotion,
and recognition toward work motivation among government trade agency
employees. International Journal of Business and Management. 14(4). pp.48-59.
Chairunnisa, C. and Jaelani, M. I., 2019. Exogent Factors at PT. Metro Taruna Jakarta That
Affect Employess Performance. Agregat: Jurnal Ekonomi dan Bisnis. 3(2). pp.112-124.
Mariappan, R. and Kalidoss, R., 2017. A Study on the Impact of Stress on the Performance of
Employess Working in Public and Private Banks in Sivagangai District, Tamil
Nadu. Shanlax International Journal of Commerce. 5(1). pp.39-50.
Ogbonnaya, C., Daniels, K. and Nielsen, K., 2017. Does contingent pay encourage positive
employee attitudes and intensify work?. Human Resource Management Journal. 27(1).
pp.94-112.
Porheydar, R. and et.al., 2021. Mediating role of performance evaluation in relationships
between organizational structure and job autonomy with organizational justice
perception and job enthusiasm. Journal of School Administration. 9(1). pp.313-289.
Riyanto, S., Sutrisno, A. and Ali, H., 2017. The impact of working motivation and working
environment on employees performance in Indonesia stock exchange. International
Review of Management and Marketing. 7(3). pp.342-348.
Theofilou, P. and et.al., 2021. Investigation of Organizational Commitment and Job Satisfaction
among Employess in Pharmaceutical Industry: The Effect of Fatigue. Journal of Human
Resources. 9(1). pp.1-9.
Online
How Does Performance Related Pay Motivate Employees?. 2021. [Online]. Available through:
<https://www.healthassured.org/blog/performance-related-pay-motivation/>
Performance-related pay: everything you need to know. 2021. [Online]. Available through:
<https://www.perkbox.com/uk/resources/blog/everything-you-need-to-know-about-
performance-related-pay>