Performance Related Pay

Topics: Motivation, Reward system, Performance-related pay Pages: 15 (4072 words) Published: April 20, 2012
Report Abstract

Purpose
This report will look into the key advantages and disadvantages of introducing performance related pay into Next retailing and the effects it may have on the motivation and performance of the workforce. Recommendations and a planned method of execution based on the findings will then be formed, followed by guide to effectively implement a PRP scheme into the rewards system. Methods

Secondary research gathered from various sources such as, books, websites, journals and government data provide the information used to compile this report. A survey conducted by the management in a single branch at Next has also been used (with permission) as a secondary source of data. Results

The results show that although employer’s implement performance related pay with the intention to improve motivation and performance, very often it has a negative effect on the workforce. Throughout the report arguments will be provided highlighting the case for a more diverse reward strategy, with the key motivational factors not just encompassing monetary remuneration but also consisting of intrinsic factors tailored to the individual. Conclusion

Although experts claim many benefits to the introduction of performance related pay, data conducted argues that these positive claims may not always be correct. Individual motivational factors differ from one person to another and an organisation cannot simply rely on money to improve the performance of their workforce.

Contents
Introduction3
What is performance related pay?3
Performance related pay at Next4
Advantages of introducing PRP4
Disadvantages of introducing PRP5
The Labour market theory7
Expectancy Theory8
Expectancy8
Instrumentality9
Valence9
Conclusions9
Recommendations 10
Appendix 1 12 Appendix 213
Appendix 313
References15
Bibliography17

Employee Reward
1.0 Introduction
The report analyses the implications of introducing performance related pay into Next PLC. Key arguments for and against the systems are to be analysed and evaluated with relevant recommendations provided. Established in 1982 and trading in more than 500 stores, Next employs over 58,000 people (Next Plc, 2011). Employee performance plays a big part in achieving key operational milestones and targets. 2.0 What is performance related pay (PRP)

PRP is a method of reward that links pay to an assessment of individual performance, measured against a goal or objective. Employers strive to increase performance levels within their staff, to increase sales and performance by linking employee reward to the business objectives (CIPD, 2011). PRP normally takes form of bonuses over an agreed rate and may be related to the performance of the firm as a whole, a sub-sector, team or individual results. Theorists such as Taylor argue that performance related pay provides motivation for better performance in order to maximise the results for the organisation and it is good for morale as staff are rewarded when profits are higher (Mullins, p. 119 2007). 2.1 Performance related pay model

The main features of PRP are shown in the model below, the fundaments of the scheme is that pay increases are related directly to achieving specific goals or targets. Pay brackets are linked to specific levels or grades, with rewards awarded depending on the achieved category.

Illustration by author, adapted from (Armstrong, p. 171. 2010)

3.0 The current reward strategy
Next utilises a strategy that primarily focuses on the non-financial aspect of reward. Financial Rewards| Non-Financial Rewards|
‘Competitive’ salary| Career development|
Bonus Schemes| Money for staff outings|
| 4 week holiday pay|
|...
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