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Performance-related pay

20.02.2013
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Performance-related pay is money paid to someone relating to how well one works. It is a financial reward system for employees where some or all of their monetary compensation is related to how their performance is assessed relative to stated criteria. Performance-related pay is generally used where employee performance cannot be appropriately measured in terms of output produced or sales achieved. Like piece-rates and commission, performance related pay is a form of incentive pay. Performance related pay can be used in a business context for how an individual, a team or the entire company performs during a given time frame. This standards-based system is used to evaluate employees and setting salaries by many employers. In addition to motivating the rewarded behavior, standards-based methods can provide a level of standardization in employee evaluations, which can reduce fears of favoritism and make the employer's expectations clear. Employees would be secure to know that their performance was evaluated objectively according to the standard of their work instead of the whims of a supervisor, or against an ever-climbing average of their group. A fundamental criticism of performance-related pay is that the performance of a complex job as a whole is reduced to a simple, often single measure of performance. Performance-based systems have met some opposition as they are being adopted by corporations and governments. In some cases, opposition is motivated by specific ill-conceived standards, such as one which makes employees work at unsafe speeds, or a system which does not take all factors properly into account. In other cases, opposition is motivated by a dislike of the consequences.

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