Performance Related Pay
The Value of HRM to Business -Performance Related Pay
Word Count: 2942
Table of Content 1 Introduction 3
2 Literature Review 4
3 Case Study 8
3.1 Case 1-Performance Related Pay: What Makes a Successful Scheme? 8 3.2 Case 2 - Performance related pay: a case study of a small business. 10
4 Analysis 12
5 Conclusion 17
Reference 18
Introduction
Human capital plays a vital role in providing the organisation with a valuable competitive advantage; in addition a reward and pay system concerning the employment relationship, is often viewed as a key method in obtaining maximum human capital, and thus a central part of managing a business.
A reward and pay system that ensures employees’ contributions to the organisation is measured by both financial and non-financial mean (Armstrong, 2007). Since it is crucial to the success of a business, selecting the most correct and appropriate reward scheme seems a part and parcel of attracting and in order to retain employees and survive in an environment with ever so fierce competition. In fact, there are numbers of reward systems, such as skill based pay and profit related pay. In this essay, we aim at mainly evaluating and analysing the value of performance related pay (PRP) in organisations.
Literature Review
From the early 1980’s, PRP rapidly developed as a motivator and way to create performance-oriented cultures, and became a popular pay scheme in organisations (Armstrong, 2002). And because of the horizontal trend of the organisations’ structure there will be less opportunity to motivate employees through promotion and then pay for reward system occupied an important role as a motivator (Conyon et al., 2001). Based on the IPD (1999)’s survey, approximately75% of respondents felt PRP had a positive impact on both individual and organisational performance.
PRP is a method of reward, where the employees can receive an increase
Word Count: 2942
Table of Content 1 Introduction 3
2 Literature Review 4
3 Case Study 8
3.1 Case 1-Performance Related Pay: What Makes a Successful Scheme? 8 3.2 Case 2 - Performance related pay: a case study of a small business. 10
4 Analysis 12
5 Conclusion 17
Reference 18
Introduction
Human capital plays a vital role in providing the organisation with a valuable competitive advantage; in addition a reward and pay system concerning the employment relationship, is often viewed as a key method in obtaining maximum human capital, and thus a central part of managing a business.
A reward and pay system that ensures employees’ contributions to the organisation is measured by both financial and non-financial mean (Armstrong, 2007). Since it is crucial to the success of a business, selecting the most correct and appropriate reward scheme seems a part and parcel of attracting and in order to retain employees and survive in an environment with ever so fierce competition. In fact, there are numbers of reward systems, such as skill based pay and profit related pay. In this essay, we aim at mainly evaluating and analysing the value of performance related pay (PRP) in organisations.
Literature Review
From the early 1980’s, PRP rapidly developed as a motivator and way to create performance-oriented cultures, and became a popular pay scheme in organisations (Armstrong, 2002). And because of the horizontal trend of the organisations’ structure there will be less opportunity to motivate employees through promotion and then pay for reward system occupied an important role as a motivator (Conyon et al., 2001). Based on the IPD (1999)’s survey, approximately75% of respondents felt PRP had a positive impact on both individual and organisational performance.
PRP is a method of reward, where the employees can receive an increase