Performance-Related Pay's Impact on Employee Motivation and Output

This essay delves into the concept of performance-related pay (PRP) within the realm of strategic human resource management. It explores the meaning and significance of PRP, highlighting its role in motivating employees and driving organizational success. The essay examines the advantages and disadvantages of PRP, providing real-world examples like Marks and Spencer to illustrate its practical application. Different types of PRP schemes, such as piecework, individual, group-related, knowledge-contingent pay, and commission, are discussed, alongside their impact on employee motivation. The essay emphasizes the direct relationship between PRP and employee motivation, arguing that financial rewards and incentives are crucial for enhancing performance and achieving business objectives. Overall, the essay underscores the importance of PRP as a strategic tool for managing and motivating the workforce to improve productivity and profitability.

STRATEGIC HUMAN RESOURCE MANAGEMENT

Table of Contents
ESSAY.............................................................................................................................................3
Meaning and concept of performance related pay of employees................................................3
Example.......................................................................................................................................4
Merits and Demerit of performance related pay.........................................................................5
Following are some demerit of the performance related pay......................................................5
Types of performance related pay..............................................................................................6
Relationship between the performance related pay and employees motivation.........................7
Herzberg Theory of employees motivation................................................................................7
CONCLUSION................................................................................................................................8

INTRODUCTION
Human resource is one of the most crucial part within the organisation that helps to
company in attaining its determining objective within specific time period. In the absence of
human resource, organisation can not attain its objective and gain effective growth and success
in the market. It is very significant task for management to motivate and manage its workforce in
such manner as they can effectively carry out their work within the company and attain business
objective in effective manner (Cilliers and Flotman, 2016). The present report provides the detail
knowledge and understanding about the motivation of employees and their significance in the
company for attain its objective. Furthermore, significance of the individual performance related
pay and its links to motivation of employees has been also discussed in this report.
ESSAY
Meaning and concept of performance related pay of employees
In the present time every business enterprise requires huge growth and success in the
competitive business environment. In order to perform in an excellent manner, corporation
should focus on the effective tactics, strategy and practices through which it can gain the
effective outcome (Alessandri and et.al., 2012). Employees motivation and performance related
pay is one of the effective strategy to manage and improve the business performance within the
organisation. In an organisation employees plays a crucial role by which firm can attain its
determined objective in effective and excellent manner. In the absence of employees, firm can
not carry outs its working and business activities. Thus, it is very important for management of
company to manage the employees and their performance in such manner as they carry out their
working and achieve business target. Motivation and encouragement of the employees is one of
the significant strategy to retain the human resource within the organisation in effective manner.
Employee motivation is a procedure to motivate and encourage employees according to their
work. In this procedure, top management and authority analyse, observe and evaluate employees
efficiency and performance and appreciate their performance in terms of monetary and non
monetary rewards (Avery and Jing, 2011). In the monetary reward's management provides the
financial rewards like incentive, compensation, bonus, fringe benefits, perquisites etc. With help
of several financial reward, financial needs of employees can be fulfilled through which they can
motivate and encourage for higher performance. On the other hand in the non monetary reward,
management provides appreciation, recognition, promotion, increment, high opportunities,

growth option, higher responsibilities etc to employees according to their efficiency and
performance at workplace. Execution related pay (PRP) is a method for overseeing pay by
connecting compensation movement to an appraisal of individual execution, generally estimated
against pre-concurred goals. In any case, in spite of the basic utilization of PRP plans, addresses
still stay around the its adequacy.
Individual performance related pay is a financial reward system for employees where
some or all of their monetary compensation is related to how their professional is assessed
relative to stated criteria. While any organisation pay the reward and appreciation to employees
according to their performance then it will directly affect the employee's motivation. While
employees motivation enhance then it will directly affect the organisation productivity and
performance (Baur and Haase, 2015). In addition to this, highly satisfy and motivated employees
also provides the high level of outcome to company and contribute his best efforts to attain the
objective of business. Thus, it can be said that employee's motivation and performance related
pay is very significant so as corporation can attain its outcome in an excellent manner.
Individual performance related pay associated with management assessment of performance and
competences. It assists in strengthen the relationship between the performance and reward. With
assistance of individual performance related pay, employees can motivate and encourage for
higher performance and there may arise competition among the workforce.
Example
For instance, Marks and Spencer is facing the issue regarding high level of employees
turn over due to which business profitability and sales has been also decreased. Personnels of
organisation are not satisfied with existing pay scale in the company. Management do not
provide incentive, bonus, compensation and extra wages to employees according to their
efficiency and performance (Chiaburu, Diaz and Pitts, 2011). Due to this issue, many of the
employees are leaving company so as organisation profitability and sales is declined. As Marks
and Spencer is retail organisation which performance and growth is largely depends upon
employees. Entire business activities and function carry out by the employees and their working.
Thus, it can be said that in the retail sector it is very important for the corporation to motivate
and maintain employees in such manner as they retain within business for long time. Thus, it has
been analysed that within Marks and Spencer, there is a situation to motivate and encourage
personnels so as they can retain within company for long time. Cited venture should adopt

performance related pay practice that helps to management in motivating personnels. In this
practice, management can provide monetary rewards according to the measurement of
employees performance. In the monetary reward, management can provide attractive wages,
bonus, salary, incentives etc through which employees financial needs can automatically
fulfilled. While individual financial requirement can effectively fulfil then employees can
automatically encourage performing in excellent manner (Farndale, 2014). While Marks and
Spencer provides the attractive pay to employees according to their efficiency and performance
at workplace then among workforce creates competition to achieve higher outcome. All
employees perform excellently in order to earn more financial reward through which quality of
work and productivity can automatically improve within the company. Thus, it can be said that
with help of performance related pay, company can retain the employees within the company for
long time and overcome the issue related employees turn over.
Merits and Demerit of performance related pay
Following are some advantage of the performance related pay within the corporation-
With help of performance related pay in the company, management can easily improve and deal
with poor performance.
The performance related pay assists to the manager in gaining the high level of outcome and high
quality of work at workplace. This assists to improve competitive advantage of organisation.
While company pay performance related pay to employees then new employees can
automatically attracted toward organisation (Ghosh, 2015).
This reward system assists in developing healthy working environment and culture through
which positivity can generate at workplace.
The reward schemes helps to organisation in eliminating the poor performance of workers in the
company. While employees receives the attractive pay then they give their best contribution and
hard work within firm to attain impressive outcome.
Following are some demerit of the performance related pay
Sometime, employees can be demotivated if the organisation objective is too hard to achieve.
The expenditure of the company can also enhance with performance related pay as company
have to pay the higher wages, bonus, and compensation to workforce.
Thee is a danger that personnels can expect an additional payout year on year.

Sometime it quite difficult for manager to analyse and observe the employee's efficiency and
performance at workplace (Jain, 2016.). This kind of confusion within the organisation can
create conflict among the employer and employees.
Types of performance related pay
Performance related pay is a term for reward system where payment are made based on
the performance either of individual or team of individual. There are various kinds of
performance related pay. The most popular ones are discussed below-
Piecework schemes- In this scheme of reward, management pay the price for each unit of
outcome. This is one of the oldest form of the performance related pay under which reward and
pay decide according to the quantity of outcome (Klotz and Buckley, 2013). This kind of pay
scale is appropriate if the output can be measured easily in the unit. For example, freelancer
design the project then pay can decide according to the numbers of words. This kind of incentive
provides to employees according to their work at workplace.
Individual performance related pay schemes-Individual performance related pay scheme is that
under which employee receives either bonus or an increase in base pay on meeting previously
agreed objectives or based on assessment by their manger or both (Pan, Qin and Gao, 2014).
This kind of pay can provide to the middle manager in the private sector organisations and for
professional staff. This kind of reward provides to employees only according to their task and
performance. This kind of reward provides to employees after accomplishment of their task
within the organisation. With help of this scheme, company can motivate and encourage
employees for higher performance that help in improving the performance of business.
Group related performance related pay schemes-This kind of reward provided by manager to
employees ad group of employees according to the target. The target are set for a group of
employees. While group of employees attain the determined target then management provide
them the attractive reward and pay. This kind of pay scheme provides to only groups who works
in collectively at workplace. While two and more than two members effectively accomplish the
determined target then company appreciate them for their productivity and hard work.
Knowledge contingent pay- This is totally based on the learning and knowledge of employees.
In this reward scheme, employees will receive a pay or bonus or incentive related to work
related learning (Park and el.at., 2014). For example, employees may receives higher salary once

he has passed all the knowledge level paper and an even higher salary after passing all of his
exams.
Commission- This kind of pay basically pay to the sales staff and commission are form of
remuneration which is used for sales staff. The staff may receive a low basic pay but will then
receive commission base percentage of the amount of their sales. With help of commission,
percentage of their pay can improve through which they can motivate to enhance the sales of
company. This kid of remuneration basically provided in the marketing and sales team in the
company. This is only remuneration which provides to employees according to their extra
affords and handwork. While employees achieve the additional task and target within the
company then management provide commission to them.
Relationship between the performance related pay and employees motivation
As per the above discussion it has been analysed and assessed that individual
performance related pay is very significant in the organisation through which employees can
motivate and encourage through which they can achieve determined objective in an effective and
efficient manner. Employees motivation and performance related pay have direct relationship
within the organisation (Peng and Zhao, 2012). If company effectively provides the financial
reward and incentives to employees then they will motivate and encourage attaining the higher
level of outcome. All employees have some basis requirement regarding financial. While
organisation provides sufficient financial reward then individual financial needs can effectively
fulfilled. By getting financial reward, employees can motivate and encourage for the higher
performance and outcome at the workplace (Blanchard, 2010). As there is a direct relationship
between the employee's motivation and performance related pay because many of the employees
performs in excellent manner for gain the high level of financial benefits from the organisation.
In addition to this, with help of financial reward, employees can motivate and encourage
performing excellently within the company. In addition to this with help of employees
motivation company can enhance the productivity and profitability of the organisation. A well
satisfactory employees can perform in well at workplace through which they attain the high level
of outcome.
Employees motivation is very important within the company through which business
enterprise can gain the competitive advantage and high level of outcome within the competitive
business environment (Eisen and et.al., 2016). In a simple word it can be said that employee's

motivation is one of the crucial aspect within the company through which management can
easily and smoothly improve its performance. Following are various kinds of advantages of the
individual performance related pay-
Performance related pay encourage to employees in giving the high quality of work because in
order to gain the high level of incentive and financial reward there any create competition
environment at workplace (Howard, 2016). This kind of environment provides the growth and
higher performance to employees.
Performance related pay also create positive image and good will in the market of organisation.
This assists in attracting new employees and decrease employees turnover situation within the
organisation.
Herzberg Theory of employees motivation
This is one of the most significant theory of employees motivation that defines that how
employees are motivated and encourage at workplace. With help of this theory, employees
motivation can understand in an effective manner (Tesson and et.al., 2016). This theory is also
known as two factor theory. As per this theory, employees can motivate at workplace by two
factors that is motivator and Hygiene factor.
Hygiene factor- This factor are those job factor which are essential for existence of motivation
at workplace. This kind of factor do not lead to positive satisfaction for long term but if this
factor absent then it leads to dissatisfaction among employees. In the Hygiene factor includes
pay, company policies, fringe benefits, physical working environment, status, interpersonal
relationship at workplace etc (Liu and et.al 2016). It is very important for the organisation to
understand the significance of this factor within the organisation so as it can meet actual
requirement of staff members and employees at workplace. While these all factor are effectively
address by the management then employees can motivate and encourage for give higher level of
outcome and attain its determined objective in efficient and effective manner. Hygiene factor
includes pay, company policies, fringe benifisg, financila reward etc so it is different from the
motivator factor.
Motivational factor- This factor are inherent to work. These factor motivate and encourage the
employees for superior performance. These factor are called satisfiers. In this factor includes
recognition, sense of achievements, growth and promotional opportunities, meaningfulness of
work etc (Bolkan and Goodboy, 2016). With help of this factor, organisation can encourage the

level of satisfaction among the employees through which they can perform in more effective
manner at workplace. This factor helps to the management in providing opportunity to
employees regarding their growth and prosperities.
Thus, from this herzberg theory of motivation it has been analysed that there are major two
factors that affect the motivation level of employees (Chambers and et.al., 2016). These factor
are motivational and hygiene factor. While organisation understand this theory and these two
mentioned factor regarding employees motivation then it becomes quite easy to encourage and
motivate employees at workplace.
CONCLUSION
From this report it has been concluded that strategic human resource management is a
practice of attracting, developing, rewarding and retaining employees for the benefits of both
employees as individual and the organisation as whole. From this entire report it has been
concluded that employee's motivation is very important to gain the high level of outcome and
result. As there is a direct relationship between the employee's motivation and performance
related pay because many of the employees performs in excellent manner for gain the high level
of financial benefits from the organisation.A well satisfactory employees can perform in well at
workplace through which they attain the high level of outcome.

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