You are currently viewing Pros and Cons for pay for performance
Pros and cons for pay for performance

Pros and Cons for pay for performance

Pay for performance is a popular method used by the human resource departments, which is about encouraging the employees to realize their full potential and hit their performance goals by offering them a monetary incentive. It is all about paying the employee based on well they perform their duties. Performance pay is conducted through merit pay increases or variable pay programs. Pay for performance is a great tool that would increase employee productivity and is now used as an employee recognition scheme. The pros and cons of the pay-for-performance compensation method on whether they can motivate the employee are discussed below.

Pros of performance pay

1. Way of boosting morale. The pay for performance boosts morale and encourages the employee to work hard as it is based on monetary value. The cause of motivation could cause vary from employee to employee due to the financial rewards.

2. Increases productivity. Pay for performance increases the employees’ productivity because they may realize that meeting a certain performance level could lead to higher pay, pushing them to work hard and develop the skills to meet the goals. The employees will produce more to earn more rewards hence improving the efficiency of the employees.

3. It offers employees more control. This compensation method forces the employees to work and gain the power to increase their wages. The employees may increase their productivity during certain times of the year and bring a sense of control and power to improve their stand at work.

4. Retains top talent. The pay-for-performance policies help the company to stay competitive as it attracts better talents for the candidates they wish to hire. Potential employees may look into companies offering that offer monetary incentives and higher compensation for their excellent work. It would persuade the employees to stay as they reward them for their excellent work and recognizes their abilities.

5. Provides clarity. The performance pay clarifies as the employees understand what leads to a raise. The manager explains the desired goals and objectives that an employee needs to meet to obtain the raise.

6. Reduces the need for oversight. The performance pay provides the employees with the objectives they need to meet to understand what they need to meet clearly. Hence, this reduces supervision at work as the employee know what is already expected of them.

7. Flexibility. Through evaluating the employees on how they work, one does not need to spend much time looking into the work done or the specific method used but primarily focuses on whether they achieved the expected results.

Cons of performance pay

Here are the disadvantages of performance pay:

1. It affects teamwork. When the employees focus more on their performances as individuals, they are most likely to forget to work as a team with their fellow employees. The employees will solely concentrate on improving their skills rather than assisting a struggling colleague.

2. Focus on the quantity of work

The pay for performance focuses more on the workload done rather than the quality of the work performed.

3. Possibility of subjectivity

In the pay performance model, the performance reviews depend on quantifiable skills and values rather than communication, creativity, and teamwork.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.