Financial Incentives - Performance-related Pay 1.4.4

Performance-related pay - is a scheme where wages or salaries are linked to performance in the workplace. There are many different schemes...

KEY FEATURES

• An appraisal (review of performance) is conducted by senior managers
• Payment may be based on specific targets
• Goals and/or targets are set for the next appraisal

ADVANTAGES

1. Senior managers can easily monitor and assess individual employee performance during appraisal process
2. Setting of targets for employees can ensure they are all closely focused to company objectives

DISADVANTAGES

1. Discourages a team based approach - can create unhealthy rivalry between managers
2. Can be difficult to accurately measure performance of some workers e.g. in service sector firms
3. Incentives may not be large enough to motivate employees
4. Employees may disagree with the appraiser