Strategic Human Resource Management Assignment 2 (GC0645)

Table of Contents

1.0 Introduction.

2.0 The Body.

3.0 Definition of performance-related pay.

Individual performance-related pay.

Team performance-related pay.

Differences between individual and team performance-related pay.

2.2 Types of performance-related pay. 5

2.3 Reasons and objectives of performance-related pay.

2.4 Importance of performance-related pay.

Staff motivation.

Staff productivity.

Staff retention.

Staff loyalty.

HRM efficiency.

Organizational performance.

2.5 Limitation of performance-related pay.

4.0 Conclusion/ justification.

4.0 List of references.

1.0 Introduction

Performance-related pay plays a significant role in the current business world to inspire and motivate the workforce in the workplace. According to Mullins (2014), performance-related pay refers to financial rewards that are provided to the staff that performs better at the standard level or above the average level. In general, performance-related pay is provided or used when the businesses face difficulties to measure employee performance in case of expected business performance. Torrington et al. (2014) classified the performance-related pay as “individual performance-related pay” and “team-based performance-related pay”.

The individual performance-related pay is provided to the individual staff. Individual performance-related pay is linked to grades, structure, competence, and performance rating. These schemes are mainly formula-driven and affect pay increase in the budget. The team-based performance-related pay focus on compensation structure, where the bonus or/and a portion of employee wages are linked to team success. In team-based performance-related pay, all the team members get similar incentive pay that sometimes de-motivates the good performers. This paper writes essays on performance-related pay. In the first section, the term ‘performance-related pay’ is discussed with its classification principle, and aims and objectives. In the second part, the importance of performance-related pay is discussed. In the third section, the limitations of performance-related pay are discussed. Finally, the strategic Human Resource Management e finding of this paper is summarized in the conclusion.

2.0 The Body

3.0 Definition of performance-related pay

The term ‘performance-related pay’ is defined by several experts in different ways. Mullins (2015) defined performance-related pay as the financial rewards that are provided to the employees based on their performance and productivity. Michael (2013) said performance-related pay refers to the financial incentive schemes that are provided to improve staff retention and motivation level. Nialon (2012) said performance-related pay is designed and provided to improve staff motivation, performance, productivity, retention, and loyalty.

Michael (2013) said the performance-related pay can be revealed in business pay structure in different forms such as commission, family discounts, staff discount, bonus, incentive on sales, paid holiday. Nailon (2012) said performance-related pay includes company profit share, maternity and paternity payment, sick payment, occasional discounts, bonus on target sales, and increased salaries. Performance-related is mainly classified as individual performance-related pay and team-based performance-related pay that is discussed as follows:

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Unit 6.1 Human Resource Management Assignment

Individual performance-related pay

UNISON (2013) disclosed that individual performance-related pay was launched during the 1980s in the UK that was implemented to motivate cultural changes and high performance from individual staff. First, the individual performance-related pay was introduced in the private sector of the UK, and later on public sector employees. Now, individual performance-related pay is widely used in both the private and public sectors to get recognition and achievement from individual staff. Organizations in the current business world focus on performance-related pay, mainly individual performance-related pay. According to Mullins (2015), individual performance-related pay is provided to the employees in the workplace based on their individual performance and productivity. Most importantly, individual performance-related pay is provided to motivate the individual employee in the workplace.

Torrington et al. (2014) said individual performance-related pay refers to the payment system designed for individual staff based on their performance and efforts to meet the business goals and objectives. UNISON (2013) stated that individual performance is designed to link the reward level of individual employees with their performance level. Organizations establish individual performance-related pay for managers based on their managerial performance. Michael (2013) believes that individual performance-related pay links to managers’ performance and pay that ultimately leads to increase motivation and performance of managers.

Team performance-related pay

Team-based performance-related pay refers to the financial reward and schemes that are provided to the teams/group of people based on their team performance in meeting the business goals and objectives (Mullins, 2015). Individual performance-related pay may create completions among the staff, but team-based performance-related pay can release tensions among the employees. The team-based performance-related pay also reduces the motivating effect of competitions without team competition against other teamwork. However, team-based performance-related pay sometimes reduces the motivation of team/group members. Richards (2016) said team-based performance-related pay may create social pressures among the team/group members. Torrington et al. (2014) said team-based performance-related pay is provided as an incentive to improve customer acquisitions over certain time periods…………..

Human Resource Management