Pay for Performance
Meaning Most businesses today say they pay for performance. It only makes sense in most situations to provide the most pay to those employees who do the most for the business. However, sometimes there exists a disconnect in the definition of performance at all levels of the organization
Advantage Align employee’s actions with the interests of the company. What aspect of the business do you need to improve? Customer service? Productivity? Business processes? A pay-for performance plan is an excellent way to focus your employee’s actions on the areas that need attention. They are a tool that can be used to shine a spotlight on key company priorities and business drivers Attract and Retain Talent - A critical business objective for every company, well-designed pay-for-performance plans help companies compete for the talent they need and communicate company priorities and critical business objectives to employees
Advantage
Give employees - a stake in the company’s success. Obviously employees realize that performing their job well helps the company do well, but the company’s success can be too far removed from the daily activity of the employee to be a motivating factor. A pay-forperformance plan can bring the interests of the employee closer to the interest of the company
Cost control- Although not as important as the factors mentioned above, one cannot ignore that pay-for-performance plan mitigate financial risk for the company. Since these plans are tied to performance, they are effective cost control mechanisms. In addition, pay-for-performance payouts are not added to base pay, and thus don’t generate the compound growth of fixed-costs that base pay increases do
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