Performance-related pay

Performance-related pay

Performance-related pay is money paid to someone relating to how well he or she works at the workplace. Car salesmen, production line workers, for example, may be paid in this way, or through commission.

Business theorist Frederick Winslow Taylor was a great supporter of this method of payment, which is often referred to as PRP. He believed money was the main incentive for increased productivity and introducing the widely used concept of 'piece work'.

This standards-based system is used for evaluating employees and setting salaries by many employers. Standards-based methods have been in "de facto" use for centuries among commission-based sales staff: They are paid more for selling more, and low performers do not earn enough to make keeping the job worthwhile.

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. For example, an employer might set a minimum standard of 12,000 keystrokes per hour in a simple data-entry job, and reassign or replace employees who cannot perform at that level. Employees would be secure in knowing 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.


Performance-based systems for rating physicians or job performance have met some opposition as they are being adopted by corporations and governments. Frequently, the opposition is motivated by fear of the unknown, and it subsides after the new system is in place and seen to operate transparently. In other 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. When intelligently implemented, standards of care have reduced hospital-acquired infections, medical mistakes and inappropriate treatment, to use the healthcare industry as an example. When implemented carelessly, standards have been a source of significant stress and low morale, no matter what the industry is.

In other cases, opposition is motivated by a dislike of the consequences. For example, a company may have had a compensation system which paid employees strictly according to their seniority. They may change to a system which pays sales staff according to how much they sell. Low-performing senior employees would doubtless object to having their income cut to match their performance level, while a high-performing new employee might prefer the new arrangement.

ee also

*Merit pay

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Look at other dictionaries:

  • performance-related pay — ➔ pay1 …   Financial and business terms

  • performance-related pay — UK US noun [uncountable] business pay that increases when you are successful at your job and that goes down when you are not successful Thesaurus: wages and salariessynonym extra payments and benefits in addition to wageshyponym …   Useful english dictionary

  • performance-related pay — N UNCOUNT Performance related pay is a rate of pay which is based on how well someone does their job. [BUSINESS] Teachers will fight Ministers plans to introduce performance related pay in schools …   English dictionary

  • performance-related pay — per.formance related pay n [U] money that you earn for your work, which is increased if you do your work very well …   Dictionary of contemporary English

  • performance-related pay — per,formance re,lated pay noun uncount pay that increases when you are successful at your job and that goes down when you are not successful …   Usage of the words and phrases in modern English

  • performance-related pay — UK / US noun [uncountable] business pay that increases when you are successful at your job and that goes down when you are not successful …   English dictionary

  • performance-related pay — noun (U) money that you earn which increases if you work well and decreases if you work badly …   Longman dictionary of contemporary English

  • performance-related — perˈformance reˌlated adjective HUMAN RESOURCES performance related payments, benefit S etc are ones that increase when your work improves or becomes more productive and decrease if the opposite happens: • Workers at most gold mines will receive… …   Financial and business terms

  • performance-related — perˌformance reˈlated 8 [performance related] adjective only before noun depending on how well a person does their job • Is there any evidence that performance related pay actually improves performance? …   Useful english dictionary

  • performance-related — adj. Performance related is used with these nouns: ↑pay …   Collocations dictionary

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