7/29/2019 PFP Ultimate
1/18
PAY FOR PERFORMANCE
BYArpan Vora
Nitika Agarwal
Vivek Patel
To :
Prof. Sameer Pingle
7/29/2019 PFP Ultimate
2/18
Some Questions to begin with
What is performance ? Is there a need to define performance why?
Is it possible to define performance ? How may performance be defined? Why should pay be related to performance to whose
performance should it be related? What part of pay should be related? How much of pay should
be related? Who decides who should get how much? Should employees know about this? At which stage should
they be brought into the picture?
7/29/2019 PFP Ultimate
3/18
It is any type of financial reward that is provided only
when certain specified performance results occur.
What is Pay for Performance ?
7/29/2019 PFP Ultimate
4/18
Motivation.
Increase the commitment.
Reinforce cultures and values.
Alignment with company performance.
Discriminate equitably between employees based
on performance
Objective of PFP
7/29/2019 PFP Ultimate
5/18
How do you select a PFP system?
In designing a PFP system three major questions
should be asked.
Who should be included in PFP system?
How will performance be measured?
Which incentives will be used?
7/29/2019 PFP Ultimate
6/18
Performance related pay falls broadly under two headings:
Merit based
The person being appraised will then be scored ontheir achievement over the year and this will correspond to alevel of pay that they will be awarded. Unfortunately thissystem is not very efficient as the focus can be on recentachievement, not on the entire year.
7/29/2019 PFP Ultimate
7/18
Goal based
The employee is then scored by whether they
achieved this objective, and this score is then linked to a
pay level. A possible downside to this approach is that
the employee may focus solely on what he/she believes
will allow them to achieve this goal, thus neglecting
other areas of their work. One major benefit of goal-
based of this method is that any organizational
aims/goals will become the priority of the individual.
7/29/2019 PFP Ultimate
8/18
For pay for performance to be
effective, agencies need to meetcertain requirements.
A culture that supports pay for performance;
A rigorous performance evaluation system;
Effective and fair supervisors;
Appropriate training for supervisors and
employees; Adequate funding;
Ongoing system evaluation
7/29/2019 PFP Ultimate
9/18
When a pay for performance system functions properly:
Outstanding performers will receive the greatest rewards, to
acknowledge their superior contributions and to motivate them
to continue high performance.
Average performers will receive substantially smaller raises,
which may encourage them to work harder to achieve larger
raises in the future.
Poor performers will receive no increase, which is intendedto persuade them to improve their performance or leave.
7/29/2019 PFP Ultimate
10/18
Areas of Study
Does performance related pay really motivate
people? Does it really affect individual performance?
How does it contribute to organization performance
and effectiveness?
Can there be a single best system?
7/29/2019 PFP Ultimate
11/18
Some Definitions
Performance Payfinancial or financially measurable
reward linked directly to individual or organizational
performance.
Individual performance related pay pay directly linked to
individual performance (mostly related to increase in
basic pay).Performance Bonus/Variable Pay non-recurring cash
lump sums related to performance achieved by the
individual, team or organization.
7/29/2019 PFP Ultimate
12/18
Competency related pay pay related to increase in thedemonstrated level of competency in doing the job
Profit sharing schemes that share a proportion of the
organization's profit with the employees (on commonbasis)
Gain sharing schemes that share a set proportion of gain
with the employees higher the gain, higher theproportion
7/29/2019 PFP Ultimate
13/18
Some Research Studies.
What should determine pay increase
Individual performance 96%
Competitive market position 72% Position in salary range 67%
External market rates of increase 59%
Internal equity issues 53%
External rate of inflation 42%
Individual competency/skill demonstration 37%
Timing and amount of last increase 30%
7/29/2019 PFP Ultimate
14/18
Moving to Practice ----
7/29/2019 PFP Ultimate
15/18
Company : Kirti Telnet Pvt. Limited ( KTPL) Kirti Telnet Pvt. Limited (KTPL),founded in 1987, in
Ahmedabad Gujarat, is the only company dedicated to data-
communications solutions
Segment : SME Person contacted : Snehal Patel
Designation : Director
7/29/2019 PFP Ultimate
16/18
Questions Addressed.
What do you mean by Pay for performance?
How do you use this concept in your organization? Explain the
rationale for using PFP.
Who decides the pay in your organization? HR? Line Manager?
Top Management? All? How it is decided?
Are you using any Employee Recognition programme? Explain.
What role employee recognition plays in motivating and retaining
employees?
7/29/2019 PFP Ultimate
17/18
7/29/2019 PFP Ultimate
18/18
Top Related