Having isolatedly discussed pay for performance here we are going to discuss other elements of the pay for performance. There are many ways through which employers use to capture the loyalty of their employees, some of these ways are: Merit Pay Plan, Pay for knowledge and skill, Fringe benefits, etc; all these are known as incentives, because they are different from the base pay or salary.
According to Heneman III et:al (1998: 186):
Incentive pay systems are primarily adopted to enhance employees motivation to
perform whereas most merit pay attempt to motivate by relating periodic pay increase more or less closely to employees performance ratings, most incentive pay plans tie day-day earnings orperiodic bonuses directly and automatically to relative objective indexed of individual, groupor sometimes organizational performance.
An incentive plan is a part on the back of employees for a brilliant performance in the cause of carrying out their official function. Mathis and Jackson(1994:389,390), echoed to this, when they posited that:
The main purpose of incentive is to tie employee reward closely to their output. Thus an incentive is a compensation that rewards an employee for efforts beyond normal performance expectation.
They went further to assert that:
Different variety systems are available for use in an organization. Stating that: incentive plan can be in individual, group, or organization. They further revealed that: individual plans work well to tie pay to performance when productivity is being directly measured.
However, incentive pay does not encourage cooperation among employees, as each employee tries as much as possible to excel and exceed the other person’s performance.
Jennifer et:al (1991) recommended that: “incentive system should be tied as much as possible to the desired performance. Employees must see a direct relationship between their efforts and their rewards”. They further noted that both employees and managers must see the rewards as equitable and desirable, as expectancy theory indicates that incentives are most effective when employees can see clearly that their efforts lead to increase in performance and desirable rewards.
Peck(1993) in his contribution affirms that: “incentive pay, or variable pay reward employees for partially or completely attaining a predetermined work objective”. They defined incentive or variable pay as “compensation, other than base wages or salaries, which fluctuates according to employee’s attainment of some standard such as a pre established formular, individual or group goals or company earning”.
This view agrees with the views of Heneman III et:al: (1998) as expressed above.
Much like seniority pay approach, incentive pay augment employee’s base pay, but it
appears as one-time payment. Incentives encourage and energize people to do more and to do better in the future by offering the employee the opportunity to earn additional financial and non-financial rewards.
Bowey (1992) stressed the need to assess the objectives of pay schemes from different behavioural perspectives. The variation in prevalence results from differences in the type of work performed, as well as from differences in attitude of both management and labour organization in the specific segment. Incentives system automatically recognizes differences
in ability and motivation. They vary from simple piece rate to sophisticated arrangements that adjust wages according to time saved or level of output either by individual or by groups of employees.
It is worthy of note here that all incentives plans are pay for performance (Bureau of National Affairs 1996, 1997, and Abosch, 1999). However, besides all the advantages so far stated about incentive pay plans, one of its major disadvantage is that where the incentive pay is substantial, it tends to develop a narrow focus to employees work. They concentrate on those aspects which they believe will initiate payments while neglecting other parts of their job.
Aswathappa (2002) opined that “the primary advantage of incentive is the inducement and motivation of workers for higher efficiency and greater output.
Obringer (2004) alluded to this, when he revealed that incentive based pay is becoming much common because of the emphasis on performance and competition for talent, and it helps to motivate employees to higher performance.
Appleby (1994) stated that: “in most incentive payment schemes, performance above a level taken as standard for job evaluation will receive a reward”.
A Public Service Commission Report observe that: “there has been clear moves in the public sector towards performance based reward, with individual performance measured being tied to corporate goals, (Dell, 1997 and Public Service Commission, 1992).
In agreement with the above, Mathis and Jackson (1994) posit that: “the main purpose of incentives is to tie employee’s rewards closely to their output, thus an incentive is a compensation that rewards an employee for efforts beyond normal performance expectations, (NPE).
Further, in agreement to the earlier views, George et:al: (1991) expressed that “incentive systems should be tied as much as possible to the desired performance”.
According to Mathis and Jackson, 1994, Abosch 1998, George et:al;1991, Carrel (1998): Individual incentives include the following:
- Piece rate
- Pay for experience
- Pay for performance
- Pay for qualification (Knowledge/skills)
- Seniority pay
- Pay for long service
- Overtime pay
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