Pay-for-Performance Salary Programs
A program which provides small increases to most employees based on changes in the labor market, with large, meaningful increases granted to a limited number exceptional employees. Increases are based on realistic performance evaluations with some employees not receiving any increase.
Design Features:
- Performance standards are established for activities that employees can impact or control.
- Traditional Cost of Living and Seniority increases are eliminated.
- Increases are withheld from poor performers until their evaluated performance improves.
- Increases may take the form of additional salary and/or cash bonuses.
Advantages:
- Increases are tied to productivity and results, rather than length of service, etc.
- Improves employee communication and teamwork.
- Provides greater job satisfaction.
- Additional compensation dollars result in attainment of desired results.
Disadvantages:
- Requires considerable effort to install and monitor.
- Is based on a foundation of trust and credibility between management and employees.
- Requires an accurate and well-accepted Performance Evaluation System.
- Eliminates length of service as a significant pay determinant. This negatively impacts the concept of "loyalty".
To find out more on how Compensation Resources, Inc. can help your company with Pay-for-Performance Salary Programs, please contact us or call us directly to speak with our compensation consultants at 877-934-0505.
