Learn how to implement the pay-for-performance approach with the help of SAP ERP HCM Enterprise Compensation Management to recognize and reward employee achievement, and to help motivate workers.
Pay for performance (incentive pay) is the theory of paying employees based on their performance — usually using a sliding scale of achievement — rather than paying them for the actual hours they work. This method of compensation is becoming increasingly common as employers look for ways to get the best from their employees.
Pay for performance is a globally accepted method of motivating and retaining employees based on their performance in the organization. This method is generally used to recognize and reward employees based on the work they are doing and how well they are doing it, and as a way to create criteria on which the employees’ performance can be evaluated fairly and objectively.
The most important objectives (Figure 1) of this strategy are:
- Increase the employees’ motivation toward their work
- Increase the employees’ commitment to the organization
- Align the employees’ performance with the company’s performance’
- Distinguish employees’ performance equitably among employees based on their performance
Pay-for-performance concept and its advantages