What is the performance related pay?
Performance related pay is the rewarding of an employee with financial payment following the assessment of the individual’s productivity and the achievement of objectives according to Paul Suff, 2007. Taylor believed that employees were motivated primarily by money and developed the piece rate in which employees were paid in accordance with their productivity. Performance related pay is designed to motivate employees to increase their productivity and to focus their efforts more closely with the aims of the organisation. It is most commonly used for managers in private sector organisations and less commonly for manual employees. Some critics argue that pay is not a major motivator in the workplace for employees which is in agreement with Hertzberg’s 2-factor theory in which he talked of rewards as being a ‘Hygiene factor’ or ‘dissatisfaction avoidance’ meaning that rewards do not necessarily lead to employee satisfaction. There are many benefits and drawbacks of performance-related pay which I will discuss and evaluate in this essay.
Maslow believed that a person’s needs are arranged in a hierarchy of five levels and are based on those needs that are unsatisfied; once a need at one level of the hierarchy is satisfied, the individual moves on to the next important need, which includes physical needs, safety needs, social needs, esteem and the need to excel at what they do best. Herzberg, on the other hand, developed his two-factor theory and believed that maintenance and motivational factors affect an individual’s behaviour. Maintenance factors include those things that will cause employees dissatisfaction if they are absent, referred to as dissatisfiers, while motivators or hygiene factors, though they may not necessarily have negative consequences in their absence, will have positive effects if they do exist.