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Performance-related pay (PRP) is a method of payment adopted by organizations to correlate employee bonus earnings and pay levels with the employees' level of performance or rating of competence

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Human Resource Management Name: Murah Mukundu ID: K0520222 Lecturer: Suzanne Molloy Introduction Performance-related pay (PRP) is a method of payment adopted by organizations to correlate employee bonus earnings and pay levels with the employees' level of performance or rating of competence. Often PRP is adopted by organizations that acknowledge money is not always a motivator thus deciding to pay employees on basis of their contribution to the organization. A feature of performance management PRP was initially introduced a motivational tool traditionally for non-manual employees but has increased in popularity through the years and has been discussed as a tool for use in the health service and in education. All business organizations aspire to be successful and profitable, which hinges on the firms performance. Business organizations have adopted PRP in a bid to improve the performance of their employees, which ultimately improving the performance of the organization, the purpose of this report is to discuss the advantages and disadvantages of PRP from the perspective of an organization Performance Related Pay PRP is a method of payment where an individual receives increases in pay based wholly or partly on the systematic assessment of job performance.1 (Redman & Wilkinson, 2006:133). PRP is a feature of performance management that entails basing bonus earnings and pay levels on an appraisal of team or employee performance against set objectives. ...read more.


This is advantageous to the firm because the weighting encourages employees to meet highly weighted targets which are of more importance. In certain organizations work is classified as either manual or non-manual and as a result problems arise in regards to measuring employees' actual rates of work. PRP is advantageous to such organizations because it can be used as necessary incentive in situations the work rate is difficult to measure. PRP incorporates the organizations aims and objectives when creating employees assessment criteria which ultimately benefits the organization because their employees are working to achieve their individual targets that have been derived from the organizations aims and objectives, effectively the employees are also working to achieve their organizations targets. Other advantages of PRP include an increase in productivity and an improvement in quality. A key objective of PRP is to reward employees for achieving set targets, employees that are largely influenced by money are likely to be more focused on their work and assert themselves more in a bid to meet their targets thus improving the productivity of the workforce. Expectancy and equity theory are based on what employees perceive to be fair, PRP is advantageous to the organization because it provides a system based on individual contribution and is appraised using a predefined assessment criteria created by employees and managers during appraisal meetings. A key advantage of PRP is it helps organizations weed out lazy employees. ...read more.


Kohn (1993) also argued professionally qualified employees view PRP as a form of management control that restricts their own freedom of action and forces them to work as their manager dictates.4 (Taylor. 2005:283). Conclusion There are various advantages and disadvantages of PRP to an organization, in theory neither outweighs the other but in practice the degree of success depends largely on the type of organization. The potential advantages to an organization of implementing PRP include retaining and rewarding industrious employees, reducing expenses by only rewarding the hardworking, aids organization to identify underperforming employees, satisfies key expectancy and equity theories, increased productivity and can be used as an incentive in situation it is difficult to determine a rate of work. The potential disadvantages of implementing PRP in an organization include employees may perceive the prospect of a annual bonus to be insignificant thus wasting the organizations resources and time, creating a hostile environment in which employees are working against each other to achieve similar targets, satisfying one employee need at the expense of another i.e. according to Maslow give the employee higher pay (Physiological) but increased competition among employees cause friction thus taking away from their love and belonging needs. I conclude that the implementation of PRP could have both positive and negative repercussions to an organization and thus it is critical that before any organization implements the scheme considerable planning should be put into the process in order for the firms to weigh the potential advantages and disadvantages to its respective organization. ...read more.

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