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Pay, Rewards and Performance
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Pay, Rewards and PerformanceThe Basics
Motivating the workforce through ‘reward’ strategies: By understanding why people need to work,
we can aim to design strategies to motivate them.
Financial Reward: The Usual Suspect
• Financial rewards: Tangible rewards, directly expressed in monetary terms (e.g. basic pay,
bonuses, pension).
• Base Pay: the initial rate of compensation an employee receives in exchange for their labour.
An employee's base pay can be expressed as an hourly rate or as a weekly, monthly,
quarterly or annual salary. It excludes extra lump sum compensation such as bonuses or
overtime pay, as well as benefits and raises.
• Contingent pay: pay that is linked to measures of individual, group, or company
performance.
o Pay for input - time rates pay
o Pay for output - piece rates, merit pay, bonuses, performance related pay
• Pay variation: differences in pay between various jobs, and or different employers and or
sectors.
• Pay progression: the movement of an employee’s pay within a pay range through service,
performance, or promotion etc.
Base and Variable Pay: Sometimes there is no Clear Line
Conboy (1976) noted that the key advantage of these time-based instruments is that both parties
have a clear idea of the ‘wage’ element of the bargain. For management the problem is that these
mechanisms do not give any clear indication of the ‘effort’ element of the bargain. This has lead to
time rate rate instruments being complicated by the addition of ‘performance; elements, often in
the form of ‘piece-rates’ or other complex ‘bonus’ calculations in an attempt to determine
acceptable effort levels (e.g. predetermined motion time systems and measured daywork). The
traditional form of such can schemes is demonstrated in the diagram below.
, Many schemes give guaranteed basic earnings which are then supplemented in ways which you can
class as:
• Proportional: wages increase in direct relationship with output.
• Progressive: wages increase at a faster rate than output.
• Regressive: wages increase at a slower rate than output.
Note:
• Time rates are mechanisms whereby reward is related to the number of hours worked.
• A predetermined motion time system (PMTS) is frequently used to perform Labour Minute
Costing in order to set piece-rates, wage-rates and/or incentives in labour-oriented
industries by quantifying the amount of time required to perform specific tasks under
defined conditions.
• A piece rate is a way of paying for work that is based on a fixed rate for a particular amount
done rather than the time it takes to do the job.
• Measured daywork is a system of wage payment, usually determined by work-study
techniques, whereby the wage of an employee is fixed on the understanding that a specific
level of work performance will be maintained.
(Source: Julie Beardwell, Amanda Thompson ‘Human Resource Management’)
Is it all about Money?
Money certainly derives in more output (although not necessarily quality), and it is definitely one of
the things people need to get from a job (Jenkins, Mitra, Gupta, & Shaw, 1998)
(Source: Sambuddha Chaudhuri ‘Exploring Financial Incentives to Promote Adherence To Anti-
Retroviral Medications In People Living With Hiv/aids’)
Other Types of Reward
• Benefits e.g. pension, life / health insurance, company car, subsidised canteen, mobile
phones, sundry allowances
• Non-Financial Rewards:
o Cannot easily be expressed in monetary terms
o They can be more personalised and less easy to compare to competitors’ offerings
o They may be tangible e.g. an office of your own!
o They may be intangible e.g. a challenging new project
o Many tick the intrinsic motivation box
o Many non-financial benefits have some cost, but some are cheap e.g. praise and
recognition!
Note: intrinsic motivation refers to behaviour that is driven by internal rewards. In other words, the
motivation to engage in a behaviour arises from within the individual because it is naturally
satisfying to you.
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