Partner Article

Performance-related pay awards too small to motivate staff

Unless your at the top of your game, performance-related pay schemes will have little effect on on how much you work, according to a new report.

In a survey conducted by XpeertHR, it was found that the schemes had greatest positive effect on staff who were already high performers. For average and poor performers, the schemes had little or no effect, and was even found to worsen the productivity of some.

Some respondents said that the performance-related pay scheme actually seemed to worsen the performance of average and poor performers.

The median paybill increase for the schemes is just 2.7%, which means employers are not able to offer significantly differing pay awards to distinguish between exceptional and poor performers. These pay increases were also often deemed to be too small to provide any motivation to employees.

Pay and Benefits editor Sheila Attwood from XpertHR said:

“Although most respondents agreed that performance-related pay is an excellent tool to improve individual performance, it has not necessarily been easy to put into practice in their own organisation.”

Few organisations evaluate scheme effectiveness formally, but even so the majority felt that the scheme objectives were met at least partially. In particular, the large majority felt that schemes improve individual and organisational performance to some extent.

Responses highlighted other motivations for using performance related pay schemes, which included to reward exceptional achievement and to focus attention on key objectives.

This was posted in Bdaily's Members' News section by Ruth Mitchell .