Comparative Analysis of Performance Related Pay and Rewards Systems

This report delves into the concept of performance-related pay (PRP), examining its role in human resource management and its impact on employee motivation. It explores the relationship between pay scales, employee performance, and motivational theories like Herzberg's Two-factor theory and Adam's Equity theory. The report also discusses the gender gap in performance-related pay and analyzes the rewards systems of two organizations: Barclays and Ladbrokes. It highlights the advantages and disadvantages of PRP, emphasizing the importance of fair and effective rewards management. The report concludes with a comparative analysis of the two companies' approaches to PRP and provides insights into the challenges and opportunities associated with implementing these systems.

Running head: MANAGEMENT OF HUMAN RESOURCES
MANAGEMENT OF HUMAN RESOURCES
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Author Note

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Introduction
Performance related pay or PRP can be defined as the way by which the organization
can manage the payment made to the employees. The payment is linked to the salary
progression of the employees by assessing their individual performance. Performance related
pay can also be defined as the financial rewards that are provided to the employees who have
achieved their goals and targets. Performance related pay is used when the performance of
the employees cannot be linked to the sales of the company or the output that is achieved
(Ishizaka and Pereira 2016). The performance of the individuals is measured with respect to
the performance standards of the organization. The reward policy of the different
organizations can vary from each other, however, it mainly involves rewards related to cash
or the increase in the rates of wages. The concept of performance related pay has grown in
the recent years. However, this concept does not play an important role in improving the team
work of the employees (Buckingham and Goodall 2015).
Discussion related to Performance related pay
The pay scale of the employees is related to the system which determines the amount
of wages that are paid to the employees. Pay scale is based on more than factors related to the
organization which include, the status or the rank of the employees, the level of the
employees and time for which the employees have been working in the organization. Pay
scale is also known as the salary structure based on which the employees are paid (Sharma,
Sharma and Agarwal 2016).
Performance related pay is strongly related to the motivation that is provided to the
employees so that they can give their best performance in the organization. Motivation has
become an important factor that is related to the performance of the employees in the
organization. The major factors that are related to motivating the employees in the

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organization include, creativity and the understanding related to the areas where the
employees have shown good performance. The areas that are required to be improved are
also related to motivating the employees in the company. The human capital of the
organization is the most valuable asset that is related to the ways of increasing the revenues
and the profitability. Motivation is mainly related to the ways by which the organization can
assist the employees in achieving excellence (Rashidi 2015).
The different ways by which an organization can motivate the employees are as
discussed further. Observing the performance of the employees over a period of time and
compare the duties performed by them with the job descriptions. The employees are also
provided with regular feedback so that they can improve their performance. The performance
related issues of the employees need to addressed as early as possible. Providing recognitions
to the employees is also a part of the motivational process. Promotions provided to the
employees based on their performance is a major part of the motivation process (Gerrish
2016).
The motivation of employees is based on the Herzberg’s Two-factor theory or the
motivator-hygiene theory. The factors related to the job that provide satisfaction to the
employees. The major factors that are related to this motivation theory are mainly, the
satisfaction and the dissatisfaction of the employees. The two major categories of Herzberg’s
motivational theory are, Hygiene factors and motivational factors. Hygiene factors are mainly
the factors related to the job which are based on the existence of the motivation. This further
leads to provide satisfaction to the employees in the long-term (Lo, Lin and Hsu 2016).
The absence of these factors leads to the dissatisfaction of employees in the
organization. Hygiene factors are extrinsic to the organization and they can also be called the
maintenance factors. The major hygiene factors include, pay, policies of the company, fringe

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benefits, status, physical working, interpersonal relationships, job security. The pay or the
structure of salary needs to be reasonable and appropriate. The policies formulated by the
company have to be fair for all the employees. The employees should be offered benefits like
health care related plans and family member related facilities. The conditions of work need to
be favourable for the employees and they need to feel safe. The relationship within the
employees and the management is also related to the hygiene factors of motivational theory
(Sanjeev and Surya 2016).
The job security provided to the employees also provides motivation to the
employees. Another part of Herzberg’s two-factor theory are the motivational factors.
Hygiene factors are not regarded as the motivators to the employees and the motivational
factors help in providing satisfaction to the employees. The motivational factors are a major
part of the work process of the organization and they affect the performance of the
employees. The major motivational factors include, recognition which is related to the ways
by which the employees are recognised by the managers. The sense of achievement among
the employees is also a part of the motivational factors. The promotional and growth related
opportunities provided to the employees form a major part of motivational factors (Kotni and
Karumuri 2018). The responsibility of the employees related to their job is an important
motivational factor. The challenges faced by the employees at their job is related to the
motivational factors.
Adam’s Equity theory is based on the balance between the inputs provided by the
employees and the outputs received based on these inputs. The theory is mainly based on the
belief that the employees can get demotivated in their organizations with respect to the job
and the employers. This can happen if the inputs provided by the employees are more as
compared to the outputs that are received by them. This can cause demotivation in the
employees and their efforts towards the job can decrease (Lazaroiu 2015).

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The inputs of the employees as discussed in Adam’s Equity theory are, loyalty,
efforts, commitment, hard work, skill, ability, flexibility, adaptability, determination, support
of the colleagues, personal sacrifice and trust in the superiors. The outputs provided by the
organization include, recognition, responsibility, reputation, praise, sense of achievement,
stimulus and job security. The balance between these inputs and outputs need to be managed
by the organization so that the employees can be kept motivated and they give their best
(DeNisi and Smith 2014).
The payment made to the employees based on their performance can help in
increasing their self-esteem in the organization. The performance related pay made to the
employees has positive relationship with the self-esteem. However, there are many
discriminations in the organizations with respect to performance related pay. The gender gap
in the organizations have been increased a lot due to the introduction of performance related
pay. This has raised the growth of the inequality of income between men and women. This
issue is related to the top executives and the other employees in the organization (Melnyk et
al. 2014).
The three factors which are related to gender gaps in performance related pay are
that, the female employees of the company receive a low share of the incentives that are paid
in the company as compared to the males. The second factor states that the female employees
depict lower sensitivity related to pay-performance as compared to the males. The
compensation related to the female employees are much more exposed to the decline in the
value of the firm as compared to that of the male employees. The performance related
payment system of the employees therefore increases the gap between the female employees
and the male employees of the organization (Cascio 2014).

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The two organizations that are taken into consideration for the purpose of analysing
and comparing the performance related pay and rewards systems are Ladbrokes and Barclays.
Barclays is a multinational bank of the British origin and has its headquarters in London. The
bank has a global reach and they offer products like, personal banking, corporate banking,
wealth management and credit cards. The bank has its operations in more than 40 countries
and around 120,000 employees in the whole world (Barclays.co.uk. 2018). Ladbrokes plc
trades as Ladbrokes Coral in the market and it is a British gambling and betting company
which was previously owned by the Hilton Group. The company has its headquarters in
London, United Kingdom. Ladbrokes was founded by Pennington and Messrs. Schwind in
the year 1886. The company was named Ladbrokes in the year 1902 Arthur Bendir joined the
organization (Ladbrokes.com. 2018).
Rewards management is related to the ways of formulating and implementing the
policies and strategies that are aimed towards rewarding the employees in a fair manner with
respect to their value and performance in the organization. This program helps in the creation
of an efficient reward system for the employees of the organization. The rewards structure
mainly consists of salary administration, pay policy, rewards, minimum wages and rewards
related to teams. The different types of rewards that are provided to the employees are raise
in the salary, bonuses, promotions and gifts. The other rewards that are intangible in nature
include, the feedback provided by managers, trust and recognition (Jiménez-Jiménez et al.
2015).
Barclays has an effective rewards system for the employees so that they can achieve
their goals and ambitions in the perfect way. The company provides many benefits and pay
package to the employees which is designed to rewards the employees for the services
provided to the organization. When the new employees join the Barclays bank they are
provided with a benefits allowance. The employees have freedom to choose their benefits

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according to their personal needs. The major aim of the bank is to help the employees in
balancing the commitments related to their work with their personal lives (Kroll and
Moynihan 2015).
The My Rewards program formulated by Barclays is related to the welfare of the
employees and their families. The benefits provided by this program covers the family
members and the future plans of the employees. The program also offers voluntary benefits in
exchange of salary sacrifice of the employees. The benefits of this program are provided to
the employees the moment they join the organization irrespective of the position in which
they belong. The employees can set up their emails so that they receive alerts and
confirmations related to the My Rewards program. The core benefits that are enjoyed by the
employees under the My Rewards program include, The Barclays Pension Savings Plan, Life
assurance, Income perfection, Private Medical Scheme (PMS), Health assessment
(Barclays.co.uk. 2018).
The voluntary benefits that are provided by the bank include, Holiday buy, Childcare
vouchers, Bike4work, Car Scheme, Gym, Health Assessment, Healthcare Cash Plan, Dental
Plan, Sharesave, Sharepurchase, Critical illness, Personal accident, Life assurance partner.
The employees are also provided with free benefits which are named as, Health Gateway,
Employee support and many more. However, the performance related pay programs
formulated and implemented by Barclays Bank has not been quite successful. The profits of
the company have reduced due to the incentives and rewards that are provided to the
employees (Nguyen et al. 2017).
The company has been providing rewards and bonuses to the employees which has
amounted three times the total dividend paid to the shareholders. These decisions related pay
for performance that has been paid by Barclays have affected the sales and revenue of the

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company. The brand value of the company has however helped it to maintain the position in
the market in an effective manner. The bank is now making plans so that they revive their
operations and maintain the welfare of the employees at the same time (Stiles et al. 2015).
Ladbrokes Coral is one of the largest retail organizations in the United Kingdom and
the performance of the employees are managed in an effective manner. The management of
human resources have become the most important function of the organizations in the recent
times. Performance management can be defined as the process by which the performance of
the employees is planned, monitored and reviewed by the managers of the organization. The
organization was established in the year 1886 and it now has its operations in other
departments including Texas Homecare. Ladbrokes acquired many other organizations
including Coral, which deals in betting, Stakis Hotels and many more (Sports.ladbrokes.com.
2018).
Performance management has been an important part of the management system of
the organization. The system can be made effective only with the help of the managers of
Ladbrokes. The strategic goals of the organization, the individual performance of the
employees in teams are all part of the performance management system. The performance
management plans of Ladbrokes mainly consist of six major components which include,
performance appraisal system, mechanism of feedback, rewards and pay system, plans related
to improvement of the employees and testing the future potential of employees. The major
drivers of the performance management of Ladbrokes are the needs to synchronize the goals
of the business with the goals related to human resources (Pulakos et al. 2015).
The performance management system of any organization needs to be designed
effectively otherwise it can have negative effects on its profitability. The key features which
help in making the performance management of Ladbrokes effective are as discussed further.

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The setting of goals for the organization is important so that the performance of the
employees can be tracked. The staff needs to be included in the goal setting and decision-
making process of the organization. The high levels of commitment, ownership and support
needs to be provided by the top management of Ladbrokes. The performance management
process of the employees has proven to be profitable for Ladbrokes and has helped in
increasing its profitability (Shields et al. 2015).
The employees are also managed effectively with the help of this system which has
helped Ladbrokes in achieving their goals. The pay for performance process that has been set
up by Ladbrokes also has been effective for the proper functioning of the organization. The
rewards provided by Ladbrokes to the employees has helped in increasing the profits and
revenues of the company. The organization has been able to create its position in the market
and satisfy their employees in the process. This process has however, increased the
competition between the employees and affected their relationships in a major way (Kroll and
Moynihan 2015). This problem can be solved by creating an organizational culture where the
employees can understand the benefits related to the rewards provided by the company. The
employees can then try to improve their individual performances by working as a team in the
company and not competing with each other.
Conclusion
The performance of the employees can be managed successfully with the help of the
rewards and incentives that are provided by the companies. The incentives can be monetary
and non-monetary as well. The performance related pay system of the companies can
therefore provide motivation to the employees so that they can improve their performance.
This system has also proved to increase the self-esteem of the employees as they receive the
rewards for the excellence in their performance. However, PRP can also increase the payment

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gap and discrimination between the male and the female employees. The two organizations
that are compared in the essay have proved that performance related rewards and payments
have been successful for one organization and unsuccessful for the other organization.
Ladbrokes has positively used the PRP and Barclays on the other hand has overused the
rewards system and had to face losses in the company. This proves that performance
management needs to be planned effectively so that the organizations can gain profits from it.

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