Effectiveness of Performance-Based Payment

 



Effectiveness of Performance-Based Payment



Introduction

Performance-based payment is also called Payment by Result. It is a monetary benefit paid to employees for their outstanding performance. Nowadays, it is a widely used managerial device to increase employees' productivity. Though the employees are capable, need some effort to reach the targets, performance-based payment could be effective. Also, it is a method of sharing gains in productivity with the employees by rewarding them financially for their increased output rate.





Advantages of Performance-Based Payment

As it is an addition to the salary, performance-based payment can effectively motivate employees to perform productively. On the other hand, it encourages the employees' positive attitudes and will improve creativity and innovation. Another advantage of a performance-based payment system is that when employees are aware of the extra benefits, it creates more reasons to utilize more time to work hard. When the morale of the workers improves, it leads to increase productivity. Management itself enjoy the overall performance of the company, which creates a culture of high performance.


Disadvantages of Performance-Based Payment

Performance-based payment might create conflicts among employees who do not receive the same. “People who don't receive incentives are naturally going to be jealous of those who do receive them”(Gaille, 2015). The negative attitude will limit productivity, and it creates competition between team members in achieving the target. "Incentives can also motivate employees to undermine each other's efforts rather than work as a group to achieve company goals" (Anonymous, 2016). There is a tendency among the employees to sacrifice the quality of the product or their job role. Especially in production facilities, the employee's main objective is to increase productivity. Hence, the rate of production can be decreased and increase the danger of accidents. It will force the employees to overwork to earn more, and also, it can be pretty costly for the company.


Conclusion

There are advantages and disadvantages of performance-based payment. Though it motivates employees, all the team members can be affected if the system doesn't manage properly. This awarding have to be affordable to the company. Also, it is excellent if the reward can be spread among all team members to feel their value.


References

Anonymous, 2016. i-admin. [Online] Available at: https://www.i-admin.com/blog/advantages-disadvantages-employee-incentives/ [Accessed 05 November 2021].

Gaille, B., 2015. Branden Gaille Small Business & Marketing advice. [Online] Available at: https://brandongaille.com/8-pros-and-cons-of-incentives/ [Accessed 05 November 2021].

Malhotra, M., 2017. [Online] Available at: https://www.slideshare.net/ravneetubs/incentives-and-performance-based-pay [Accessed 05 November 2021].

 

Comments

  1. Benjamin Thason6 November 2021 at 09:15

    Dear Sanjaya

    We can see this is happening in the coperate sector Where as the out put of the staff is very much higher comparing state employess .this really motivates the staff for their commitment and the hard work they extends towards the organization

    I recommend peroframce bad payment should apply for the state institution's as well for better results especially in the service sectors

    We experience that where ever this is not applies effectiveness and the efficiency is not up to the mark

    ReplyDelete
  2. N R Waduge. MBA6 November 2021 at 20:42

    Dear colleague,

    Effectiveness of performance based payment, is good concept if its apply to government sector to improve efficiency and effectiveness of all employees and top management.
    Sri lankan Cricket board recently applied this payment system to the national Players as well.
    Good luck.

    ReplyDelete
  3. Shanaka herath6 November 2021 at 22:45

    Performance based payment definitely increase efficiency and productivity of that organization. Most of organizations are following this tears by providing KPI . Appreciate your sharing.

    ReplyDelete
  4. ARSHAD MBA6 November 2021 at 23:04

    Performance based payment method effective to get High Productivity specially in the Insurance Sector it is an Key component which we are experiencing, more than the disadvantages , it's positive way of motivating skilled employee. Good Move from you,

    ReplyDelete
  5. Dr. Panduka Mahamithawa7 November 2021 at 01:36

    Excellent topic and a note. Few colleagues raised a discussion that if this concept is adopted to the state sector it'll be good move. Yes for some services it will be really great change to start with it. Well-done Mr.Sanjaya.

    ReplyDelete
  6. Hariz Haniffa8 November 2021 at 06:10

    Im an apparel sector person We believe in payment by result always, Be it any section of our organisation from marketing up to final packing, entire supply chain is agreed by the performance based payments, your article it very well Sanjaya.

    ReplyDelete
  7. Nuwansiri Rathnayake8 November 2021 at 10:37

    If I'm not wrong we are calling it from another way as "pieces Rate". In Textile Sector. totally agreed with your above advantages and disadvantages. But this is also one way to motivate the employees. Workers are more interesting to adding extra value into their monthly wage. on the other hand production efficiency is getting higher and company raising their profit margin too. Thanks for sharing these interesting points!

    ReplyDelete
  8. Steffni_D9 November 2021 at 04:57

    In this topic there you have both advantages as well as disadvantages. Main advantage is employees will perform well to get the payment. And main disadvantage is employees will fed up with hard working environment. Therefore the organisation should take necessary measures to ensure about the employee satisfaction.

    ReplyDelete
  9. Thushara Wattegedara22 November 2021 at 05:51

    Workplace common conflicts of bottom layer shop floor associated are mainly based on workers education background and also mainly the company task setting and workplace environment hence it is not actually problem of workers but due to management errors, it happened. Good one thanks.

    ReplyDelete
  10. Chenaka Hettiarachchi24 November 2021 at 02:14

    It is a hot topic, especially for the Apparel industry. This concept is a type of employee motivation.

    ReplyDelete
  11. Sandya 8 December 2021 at 09:09

    This comment has been removed by the author.

    ReplyDelete
  12. Sampathpc10 December 2021 at 09:49

    This is very appropriate topic to make hot discussion. yes exactly must have a good reasonable payment for the every worker for their job. but this thing estimating is need to do in correct manner. you explained it properly and its easy to understanding.

    ReplyDelete
  13. Asitha D12 December 2021 at 03:12

    Performance based payment is a method to make payments for employees based on the individual performances. It is supportive to measure and evaluate performances of employees and make the payments.

    ReplyDelete
  14. Sandya 12 December 2021 at 06:36

    While performance-based remuneration might motivate employees to work more, it can also lead to increased stress and decreased job satisfaction. Performance-based pay is a type of remuneration that is dependent on how much an employee contributes to the organization. Employees often believe that performance-based rewards impose too much pressure on work, despite the fact that they inspire them and foster positive attitudes. In your article you have explained both advantages and disadvantages too. well done.

    ReplyDelete

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