The Importance Of Pay For Performance

1366 Words 6 Pages
Pay for performance, also referred to as merit pay or incentive pay, is paying an individual beyond their base pay for completing agreed-upon measures of performance, rather than only for the time they have worked, seniority, or their ownership within the company (Making pay-for-performance pay). In structured pay-for-performance plans, the owner and the employee have a documented understanding between performance and the incentive in which the agreement outlines the expectations of the employee in order to receive their incentive pay (Making pay-for-performance pay). It also includes how accountability will happen and what the payout will be. This type of compensation varies yearly and goes beyond their base salary (Making pay-for-performance …show more content…
Changing the way an employee is paid will not be helpful if there are other problems within the company, such as communication and morale. An accurate performance diagnosis should be completed to determine if there are any problems by examining the organization, it’s processes, work teams, and individuals (Swanson, R. A., 2007). If it is determined that employee performance would benefit from an incentive pay plan, and all other areas within the organization are sufficient, the company should proceed with instating …show more content…
They should have a time frame determined for when they should meet initially to discuss the plan. This could be after the first quarter or after six months. A timeframe should also be determined for how often the plan will be reevaluated. The company should stay involved in the development of the process and anticipate that things may change often, especially in the initial stages. The meetings should focus on whether the company’s goals are being met, if there are any suggestions for improving the system, and if employees are satisfied with the change and feel like they are being fairly compensated. The pay rates should also be routinely examined to ensure that employees are getting paid at a fair market

Related Documents