Pay and Reward

As a HR Managers I could interview my staff and review their pay. This gives me a chance to reward my employees and for doing a good job. I have looked in many different aspects of changing the reward system to address each of the problems specified. In recent years reviews have been associated with the system ‘Performance Related Pay’. This means that as a manager I examine individual’s performance by reference to performance benchmarks (i. e. what the typical employee can be expected to achieve). This will enable me to see how far above or below that benchmark an employee is performing.

This then determines what pay rise the individual will get. My research carried out to find out what ‘Performance Related Pay is? ‘ Performance Related Pay is a method of payment where an individual employee receives increases in pay based wholly or partly on the regular and systematic assessment of job performance. It is argued that PRP, in the right context, can be of potential benefit to both employers and employees. It can, for example, help employers improve the efficiency and effectiveness of their workforce by emphasising the need for high standards of job performance.

It can also offer the flexibility to help motivate and retain valuable employees by targeting higher pay and reward at better performers. Some organisations give a rise in the individual review for above average performance. There is often managers who try to be kind to everyone so poor performers get very little less than good ones, because the mangers sees the employee every day and may not want to create bad feelings that would damage their working relationship. In many organisations trade unions negotiate a pay deal with the employer.

In such cases the pay deal agreed will apply to all employees, except for senior managers. In these organisations individuals pay reviews will only apply to senior managers. Employers of very different sizes have introduced or are actively considering the introduction of PRP. Although more commonly found in larger organisations, smaller firms are also considering its appropriateness. Furthermore, it has been introduced by public bodies and is not confined to the private sector.

However, as PRP schemes can be time-consuming to implement and manage and can involve a substantial change to an organisation’s culture, they are often restricted initially to a particular group of employees (usually senior management) before consideration is given to extending them to other parts of the workforce. Such a gradual approach has certain advantages: It is important to establish that such an approach will be acceptable since restricting PRP in this way could lead to the charge that some employees are being treated more favourably than others.

However, if the scheme has proved effective with the pilot group, it can then be introduced for other employees, or for the majority, and will be more likely to prove equally effective. So my PRP should be based on the foundation of a sound payment system and accepted salary levels. It should not be introduced if what is really required is a general increase in wage rates – PRP is not an effective substitute for adequate basic rates of pay. Another method of improving the payment system is to redesign the payment structure and re-evaluate job grading.

Some employers may find that introducing appraisals and setting systematic and achievable objectives improves the performance of the majority without the additional incentive of an element of pay. I should not introduce PRP a ‘market supplement’ payment to retain certain groups of employees. Any scheme is likely to fail if additional payments are given to some employees but not to others, for example in areas where there are skill shortages. The scheme is unlikely to induce improved effort from the majority as it will not be seen to be rewarding better performance.

As we employers seek to compete more effectively to meet customer requirements we are increasingly examining methods of improving workforce flexibility and engendering a culture of high performance in our organisations. By making a distinction between individuals’ pay on the grounds of properly measured criteria and by linking reward more closely to performance, employees may be encouraged to increase productivity. Resources can be better targeted to recognise effort and achievement, and to reward and retain more effective employees.

Properly introduced, PRP can be used as a mechanism for promoting greater employee involvement and commitment to this organisation. Improved quality and customer service can be additional benefits. Employees will except the introduction of well designed and implemented PRP schemes as a fairer means of recognising that more effective performers should receive higher pay. There is thus a more direct link between effort and reward which may in turn lead to an improvement in morale.