Final answer:
Performance related pay is a compensation system where employees are remunerated based on their performance. It can lead to increased productivity and career growth but may also result in pressure and job insecurity. It's essential to balance such systems with considerations for employee rights and job safety.
Step-by-step explanation:
Performance Related Pay
Performance related pay is a system where an employee’s remuneration is directly related to their performance or productivity in the workplace. This form of compensation is designed to motivate employees to work harder and improve their performance as their pay increases with better results. One common example of performance related pay is a piece-rate system, where employees are paid a fixed rate for each unit they produce or sell.
Advantages of Performance Related Pay
- It can lead to increased productivity as employees are motivated by the potential for higher earnings.
- Promotes personal growth and professional relations through a focus on individual achievement and career advancement opportunities.
- Facilitates better supervision and feedback, as managers can directly relate pay to performance metrics.
Disadvantages of Performance Related Pay
- May lead to unhealthy competition among employees and negatively affect teamwork.
- Can result in pressure and tedium, as employees may feel compelled to meet targets to the detriment of their well-being.
- Predictability in income can suffer, causing some insecurity of position.