‘Pay for performance’ envisages the concept of incentives and pay driven by actual performance. It is the returns earned by the employees on the basis of their efforts at a given task. It provides the basis for performance measurement strategies. The same is responsible for identifying skill gaps among the employees. Once identified, suitable training programs can be designed to bridge these gaps. The challenge before the organizations is to formulate effective ‘pay for performance’ programs.
Successful pay-for-performance design and implementation begins with solid total reward strategy. This gives the company a structured platform from which future program decisions can be made consistently across the company, even as the environments change. It can also contribute to ensuring that human resource programs are aligned with the overall business strategy and the company’s direction. Designing and implementing a total reward strategy is straightforward. An appropriate planning and a holistic approach are required to effectively link performance to these rewards.
These articles will help you to understand more about pay for performance:
1. Organization Differences in managing compensation
2. Pay for Performance : Evaluating performance appraisal and merit pay
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