The Extent of IPRP in Stimulating Employee Performance: A Review

This essay provides a critical evaluation of Individual Performance Related Pay (IPRP) and its effects on employee performance, drawing on published research. The introduction highlights the increasing significance of IPRP, particularly in the manufacturing sector, and defines it as financial rewards for exceeding performance standards. The essay examines the circumstances under which IPRP motivates employees, such as when equity and efficiency are observed, financial rewards are visible, and compensation decisions are reversible. Conversely, it explores situations where IPRP may not be effective, including small salary increase pools, discriminatory reward systems, adverse economic conditions, and interrelated employee duties. The conclusion emphasizes the difficulty in determining IPRP's impact on motivation and organizational success due to various influencing factors. It underscores the importance of identifying the most appropriate reward system to meet specific objectives and acknowledges the limitations associated with each reward system, stressing that individual performance should be reflected in pay to align employee efforts with organizational goals.

Drawing on published research,
critically evaluate the extent to
which individual performance
related pay (IPRP) can stimulate
higher levels of performance from
employees
Cornel Adam 21404292

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................7

INTRODUCTION
The individual performance pertaining to the pay has rise significantly particularly in the
manufacturing sector with the aim of improving the performance of the employees. It is basically
the financial reward to the employees whose performance has surpassed the level of standard set
by the organization. IPRP differs from the other approaches as it is performance and the formula
driven. This essay critically analysis the individual performance based pay system which leads to
higher performance level of the employees and along with this, it states about the circumstances
in which it works well and the one in which its does not work.
Circumstances under which IPRP tends to motivate employees
Under the situation when the efficiency and the equity is being observed, then the firms
can purchase the employee motivation and energy in order to meet with the organization's
objectives through the way of distributing rewards in monetary form. When the equity is
increased, the employees have a feeling of being valued in the organization and therefore, they
are strives to attain the standard performance level. The major gap among the employees is the
demotivation level is also mitigated through the reward system (Hoque and et.al., 2018).
Therefore, the rewarding system should be introduced and handled in an effective way taking
into account the employee's need. Another circumstance is when the financial reward is visible
as most of the companies do not disclose it but some that do are having higher potential in
respect to motivating the employees by the way of performance based pay. By making the
reward system visible, it creates transparency and fairness of the system which the employees
can see and in the end it leads to motivating the employee sin enhancing and improving their
performance and quality of work as they are well aware of the awaiting rewards.
As per the research already conducted shows that the employees in the entities where
providing reward is not possible are most likely to be in the worst condition in comparison to the
other organizations which is the mainly because of the factor of demotivation. Along with this,
the non-financial reward system should be publicized which creates visibility to all the
employees and also develops fairness pertaining to the reward system (Kumar, 2019). There is
also circumstance which should be taken into account, which is compensation decisions are
reversible and the reward system should be designed and organized in such a way that the
decisions related to the rewards can be reversed. For instance, that bonuses which is being
provided to the specific employee in a particular year can be offered to another employee in the

following year which is based upon the performance. The changes made in respect to this leads
to the increase in the level of motivation among the employees and also encourages and
persuades the employees to put in extra efforts as it is not possible that they will receive that
much amount of salary.
Circumstances under which IPRP does not work well
Organizations or the entities having small salary increase pools and then such companies
might take lot of time and resources in regard to the rating and rankings of each of employees
which consequently leads to the high expectations by the staff which leads to higher
disappointment at the end. Under such situation, the pay based upon the performance is seems to
be important but then it turns out to be difficult as it becomes insufficient (Shehu, Opele and
Owolabi, 2017). The size of the reward to be effected on the employees is the major contributing
factor to be taken into account before implementing the performance related pay system. The
employees who put into more efforts and time but in return are receiving very minimal rise in the
pay might become demotivated and also increases the chances of quit in the extreme conditions.
Another circumstance is where the rewarding system is discriminatory which is based
upon the level of staff. Organizations often have implemented different reward systems for its
employees and the managers and this might also differ as per the level of management like the
senior personnels are evaluated and compensated differently as against the junior managers. But
on the other hand, this is also done by the organization for the reason that it will motivate new
employees and the junior managers to achieve the higher heights in order to gain higher and
attractive reward packages. But the restriction eligibility may make it ineffective and
unproductive even if it is a good idea in the past years when the organizations were having many
tiers but in the modern organizations, the structure is flatter which minimizes the chances of
winning.
Under the situation when the economy is adverse and the differences in the pay is high.
During the times of less inflation the variation in the pay might look smaller which the
employees might not be able to notice, therefore, this is having less impact over the employees.
But in contrast to it, during the times of high inflation, the difference in the pay seems very
clearly can be noticed by the employees pertaining to the change in the value of money or higher
increment in the pay (Performance-related pay. 2020). This is complex and difficult to create
differences in pay due to the limited and lower budgets and this has resulted into replacing

effective management for performance related pay system. This situation mainly arises when the
management assumes that the effective management and the performance related pay are the
same. In the situation where the reward system is inefficient and does not reward the right
people, the high performers are highly burdened with the overload of work while on the other
side, the poor performers can easily get vacations and leaves. This consequently leads to making
high performers in discourage and also de-motivates them to perform better and the poor
performers will tend to remain at the comfort zone as they are not having any point of
improvement.
One situation or the circumstance occurs when the duties of the several employees are
interrelated and interconnected with one another. The major issue pertaining to this circumstance
is that the inability of the organization or the entities in differentiating between the specific
contribution being made by the particular individual or the employee. Also, even if the
separation is possible, it may not be necessary that every detail can be gathered and also will be
time-consuming process and involvement of lot of resources which is as per the some of the
researchers (Ahmad and Farooq, 2020). The major and the foremost reason behind this is that the
workers are not in control of their outcome as they achieve the final result which is relied upon
colleagues who worked into this. From the point of view of the staff and the workers, the
measuring of the performance of the employees is the core factor which brings dissatisfaction
and consequently resulting into demotivation. An employee will always perceive favouritism in
the appraisal and performance evaluation system. In case, if the dissatisfaction is higher on the
larger on a scale then this will have a negative impact over the total motivation of the staffs in
the organization which leads to decrease in the efficiency and effectiveness and inability to meet
with the business objectives.
Thus, these are the factors or the circumstances under which the IPRP tends to result into
motivating the employees while there are certain circumstances in which it might not work
effectively and will fail to meet with the desired goals and objectives. Therefore, it is essential to
understand the pros and cons of each reward system.
CONCLUSION
It can be inferred from the above that it is very difficult to determine whether the
performance related pay is having an impact over the motivation level and the performance of
the employees at large which is because motivation is only affected and relevant to some extent.

Along with this, the impact of it on the overall success of the organization is not visible. Thus,
there is not such fixed or particular reward system which helps in ensuring success. Apart from
this, there are various other factors or the variables which assists in determining the level of
motivation which makes it complex and challenging in stating that whether IPRP is effective or
not. This involves the industry type, culture and values in the workplace, types of employees,
communication and coordination and so forth. It is important to note that there are certain
drawbacks in association with each of the reward system which makes it crucial for the
organizations to identify the best reward system which is appropriate in effectively meeting with
the objectives. The individual performance is crucial which should be reflected in the pay
cheque. This might not be able to fully motivate the individuals but also makes sure that the
energy is directed towards the organizational goals. Thus, the appraisal system being used by the
entity is subject to many errors which can pose as a barrier in the effect of the motivation
towards the individual performance related pay (IPRP).

REFERENCES
Books and Journals
Ahmad, G. and Farooq, S. U., 2020. Performance Related Pay and its Impact on Organizational
development: A Study of Banking Sector of Pakistan. Abasyn University Journal of
Social Sciences. 13(1).
Hoque, K. and et.al., 2018. Are high‐performance work practices (HPWPs) enabling or
disabling? Exploring the relationship between selected HPWPs and work‐related
disability disadvantage. Human Resource Management. 57(2). pp.499-513.
Kumar, A. S. P., 2019. The impact of reward systems on employee performance across different
work environments–a management perspective: A case study on murugappa group
(TIDC) (Doctoral dissertation, Dublin Business School).
Shehu, A., Opele, J. K. and Owolabi, R. O., 2017. Innovation, Mentoring and Reward System in
University Libraries in Nigeria. MiddleBelt Journal of Library and Information
Science. 15.
Online
Performance-related pay. 2020. [Online]. Available
Through:<https://www.cipd.co.uk/knowledge/fundamentals/people/pay/performance-
factsheet>.