Why paying only for performance works in theoryIn this short article I will explain why the statement “The introduction of individual pay for performance contributes to an improvement in the (financial) situation of a performance company” is not, in my opinion, valid. Before we launch into a reflection on the statement, two questions arise that will be discussed by way of introduction: “What is pay for performance?” and “Why is pay-for-performance considered a system that could contribute to a company's performance?” What is pay for performance? Pay for performance is a motivation concept in human resources, in which employees receive compensation for their work based on how well they achieve certain goals (individually or with their team, department or company). The term is often used when addressing the topic of variable pay based on performance. Although not generally recognized, the term pay for performance should, in my opinion, include, in addition to variable pay, also fixed pay and intrinsic rewards. According to Dreher and Dougherty most current pay systems are not linked to performance but only to circumstances and skills and competences: 'Most pay structures can be defined as job-based pay (…). Some companies have introduced a new compensation system towards skill- or competency-based pay. In these systems, employees receive pay raises as they gain additional skills or expertise, not when they move to a job with a higher pay range.’ .
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