MR637 Compensation Management

Introduction

Performance-based payment is the process in which the employees get paid based on their performance (Liinamaa et al., 2016). The compensation depends only on the work done by the individual and has no fixed value. Piecework and commission are the two most used performance-based payment methods.

Thesis statement

The effectiveness of performance-based pay in organizations is a highly controversial issue. The organization and workers both possess different aspects regarding performance-based pay. Although the critics state that the compensation creates mental stress among the employees to work harder, the scenario can be turned into a successful strategy and should be incorporated in an appropriate way in the organization.

Logical and complete defense

Performance-based pay demonstrates the encouragement of the organization towards the employees. The research has found that some employees desire to have a steady salary based on the job role (Parker et al., 2019). According to them, the commission calls for additional pressure that generates unnecessary mental stress on the employees and makes them feel insecure in the workplace. Additionally, the favoritism game can occur to give benefits to the particular works. The work culture will be negative due to the competitive ambiance and it will create scarcity in the collaborative mindset.

However, the system can be presented in a different approach which will not only enhance the productivity of the organization but also the employees start to enjoy the benefits (Walker, Less & Casquero-Modrego, 2021). The benefits of the performance-based payments are as follows-

• Employee engagement- The employees get the motivation to push themselves further and perform better when their works are recognized and validated by the office. The appreciation presents as a form of incentive as well as appreciation comes from the supervisor. The incentives help to enhance the financial status and lead to the next stage in the job hierarchy.
• Cultural change- The healthy bonding among the employees helps to cheer up and inspire others to and the workplace holds a positive vibe to amplify the culture (Noe, et al., 2017).
• Production increment- The employees pay full attention to bring out the maximum potential and the individual effort becomes a strength for the organization. The objective is not limited to work harder rather it promotes the smart work and uniqueness of each employee (Huba & Vrancic, 2021). The differentiation in the working method helps other workers to understand the drawbacks and modify the working pattern to achieve the target. In this way, the employees support each other and the increment happens in production.
• Unit cost reduction- The increased productivity level results in reducing the cost of unit production. The remaining capital is reinvested and utilized by distributing among the employees as a bonus to celebrate the effort (Rao, 2021). This is beneficial for both the company and workers which inspires to maintain productivity in future work.

The payments are given as incentives such as individual incentive, retention bonus, referral bonus, team incentive along with gift coupons, vouchers, prizes, tickets, technical products which will be fun to accomplish the goal. The working leaves are also added as a gift which uplifts the energy of the employees.

Example

Uber has the performance metrics and uses the performance-based pay depending on the customer's feedback and driver's service (performyard, 2021). The drivers have approved the system and stated that it has helped to build a positive workplace culture that motivates them to perform better.

Conclusion

Performance-based pay is beneficial to increase the profit in the organizations. The system should be implemented to motivate the employees to perform better and enjoy the incentives. The professional life will be monotonous if the commission is not given as it improves the capabilities and the employees get satisfactional with their own performance levels.

References

Connor Harrison. (2019). What is Pay-for-Performance Compensation? [Ebook]. Retrieved from https://www.salary.com/blog/what-is-pay-for-performance-compensation/

Huba, M., & Vrancic, D. (2021). Extending the Model-Based Controller Design to Higher-Order Plant Models and Measurement Noise. Symmetry, 13(5), 798. 

Liinamaa, J., Viljanen, M., Hurmerinta, A., Ivanova-Gongne, M., Luotola, H., & Gustafsson, M. (2016). Performance-based and functional contracting in value-based solution selling. Industrial Marketing Management, 59, 37-49.

Noe, R. A., Hollenbeck, J. R., Gerhart, B., & Wright, P. M. (2017). Human resource management: Gaining a competitive advantage. New York, NY: McGraw-Hill Education. 

Parker, S. L., Bell, K., Gagné, M., Carey, K., & Hilpert, T. (2019). Collateral damage associated with performance-based pay: the role of stress appraisals. European Journal of Work and Organizational Psychology, 28(5), 691-707. 

performyard. (2021). How Does Uber do Performance Management? [Blog]. Retrieved 2 June 2021, from https://www.performyard.com/articles/how-does-uber-do-performance-management.

Rao, R. S. (2021). Do Activity-Based Incentive Plans Work? Evidence from a Large-Scale Field Intervention (Doctoral dissertation, University of Minnesota). 

Walker, I., Less, B., & Casquero-Modrego, N. (2021). Emerging Pathways to Upgrade the US Housing Stock: A Review of the Home Energy. 

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