Contingent Pay.pptx

Contingent Pay

1. Contingent Pay

2. Contingent pay covers the various methods of providing additional rewards for individuals or teams

3. Types of contingent pay Contingent pay for individuals Service related pay: provides fixed increments which are usually paid annually to people on the basis of continued service either in a job or in a grade Competence related pay: Links pay to an assessment of competence achieved Contribution related pay: Links pay both to performance as measured by results and competence Skill based pay: Which provides additional payments that reflect the level of skill attained

4. Types of contingent pay contd. Contingent pay for teams Payments to members of a formally established team or the provision of other forms of non-financial reward which are linked to the performance of that team. The rewards are shared by the team members in accordance with a published formula. Contingent pay based on organizational performance: Profits sharing: Provides a cash payment related to the level of profits Profit related pay:Provides for a proportion of pay to go up or down in line with profits Gain sharing :Shares gains in terms of added value or some other measure between the company and its employees , and includes various forms of its involvement

5. Performance related pay Provides individuals with financial rewards in the form of increases to basic pay or cash bonuses which are linked to an assessment of performance , usually in relation to agreed objectives.

6. Reasons for introducing performance related pay To attract the right type of applicant and to send strong messages to those employees the organization wanted to loose as well as those they wanted to retain To achieve organizational transformation by promoting values suggesting that the company was performance-driven , cost conscious and flexible , and by encouraging commitment- locking individuals in through objectives cascading from the company’s business plan.

7. Stages in development of PRP program Define the objectives Analyze the existing situation Decide on the involvement of line managers, team leaders, employees , trade unions. Consider alternative designs Consider process elements Produce overall design Prepare implementation program Implement communication and training programs Implement the plan Evaluate the impact of the plan

8. Advantages and disadvantages of PRP Advantages Disadvantages Motivates Is a lever of change Links rewards to results Delivers message that performance is important Helps to attract and retain staff Meets basic human need-to be rewarded for achievement Is not the only motivator Is not an effective motivator Can demotivate May deliver the wrong message Problems of measuring performance Relies on managerial judgment which may be partial Emphasizes quantity at the expense of quality Is prejudicial to teamwork May be discriminatory May not deliver value for money May not be appropriate Is too often taken on trust May be right in principle but is hard to make work in practice

9. Advantages and disadvantages of Competence related pay Advantages Disadvantages Encourages competence development Fits de-layered organizations by facilitating lateral career moves Helps to integrate role and organizational core competence Forms part of an integrated, competence based approach to people management Delivers message that competence is important Relies on appropriate relevant and agreed competence profile Assessment of competence levels may be difficult Might pay for irrelevant competencies Link to pay may be arbitrary Costs may escalate if inappropriate or unused competencies are rewarded

10. Competence related pay Method of rewarding people wholly or partly by reference to the level of competence they demonstrate in carrying out their roles. It is a method of paying people for the ability to perform.

11. Process of competence related pay Competency analysis Agreeing competency requirements in a particular role Assessing levels of competence for individuals against the requirements Relating pay of individuals to the assessment

12. Appropriateness Well researched competency framework exists Criteria are available for the measurement/assessment of competencies The organization is concerned with the development of competence levels Managers and staff are properly briefed and trained on the assessment of competence

13. Performance Management A business process intended to ensure alignment of group and individual efforts for achievement of continuous business improvement How much and how??

14. Critical success factors Ongoing tracking Direct linking to company’s mission Timely communication and skills training Connection between reward and performance Objective feedback and review Employee ownership – I own the direction in which I go Senior leadership involvement

15. Mission Why does the company Exist ? Vision of future Where is it going? Strategic organizational goals How will it Get done? Esp. Focusing on Values. Core Organizational Capabilities Performance Development & planning