What Is Performance-Based Compensation?

Performance-based compensation is an incentive payment paid to employees for excess work or outstanding performance, and is designed to encourage employees to improve work efficiency and quality. It is a recognition of employees' past work behaviors and achievements, usually adjusted with changes in employee performance. These include "performance raise", "one-time bonus" and "personal special performance award" three more commonly used forms.

Performance pay

Generally speaking, performance refers to the contribution of the unit body to the organization within a given period of time. This unit body can be an individual or a group. Salary refers to the reward for the employees' labor in the organization, that is, the human capital that the organization must pay. . It is "the financial reward and the need for self-respect for employees as part of an employment relationship." Especially in an increasingly complex and materialized society, pay is increasingly prominent as a sign of status; the so-called performance pay Refers to linking employees' financial returns to their successful job performance in order to

(I) Performance

Performance compensation is

I. Quantitative Evaluation Standards

Chinese managers and employees are not used to qualitative standards. Compared with the quantitative standard, the qualitative standard is too ambiguous, and the performance evaluation mainly depends on the judgment of the manager. Employees fail to clearly understand the meaning of qualitative standards, preventing them from achieving specific

In a general enterprise at this stage in China, salary is still the most powerful way to motivate employees for a long period of time, and unreasonable salary has seriously affected the employees of the company.

(1) At the individual level, performance-based compensation closely links rewards with employee performance, making corporate pay more objective and fair.

(2) At the organizational level, combining performance with compensation can effectively increase productivity and make compensation more market-competitive; at the same time, because it separates labor costs into variable and fixed parts, it helps reduce the cost pressure on the organization .

Disadvantage analysis

(1) It is difficult to be scientific and accurate when the performance standards are unfair. The design and management of performance compensation system requires a strict and accurate performance evaluation system. However, in actual operation, performance evaluation is difficult to be scientific and accurate, often in a formal way.

(2) Overemphasis on individual performance returns has an adverse effect on the team spirit of the enterprise. When an organization achieves certain performance goals, its total performance bonus is usually a fixed value. The share that employees can share depends not only on individual performance, but also on the relative level of their performance in the organization. Therefore, the performance compensation system, which rewards self-centered individual efforts, often results in excessive competition between employees when teamwork is needed, which affects the achievement of the organization's overall goals.

(3) Stimulate the divergence between high-performance employees and actual income, making it difficult to determine the level of compensation needed to improve performance. Efforts to link performance to standards are often unattainable. The performance compensation system is based on the assumption that efforts are linked to performance and that performance is linked to compensation. However, in reality, this assumption is often untenable, mainly because employees have difficulty controlling their own performance levels.

(4) Undermine the psychological contract and induce a variety of contradictions. The performance reward plan is actually a kind of job accelerator. Sometimes the increase of employee income will lead to the introduction of more stringent output standards. This will not only destroy the psychological contract between the organization and employees, but also increase the generation The opportunity for friction will also cause friction between excellent employees and ordinary employees.