Last week we explained that there are many different performance pay systems and after pay increases or pay range movements, the next most common type is:
Principle 2 : Performance Pay or Contribution Pay
Performance Pay – rewards colleagues for how they perform against their objectives. Performance pay is seen as a one dimensional system.
Contribution Pay – rewards colleagues for how they perform against their objectives and how developed/capable they are. Contribution pay is based on the theory that a fully competent colleague would be expected to fulfil all responsibilities/objectives of the role whereas a new or developing colleague would only be expected to achieve fewer or less complex objectives or lower targets/measures. Whereas a “master” or expert in the role would be expected to achieve additional or more complex objectives than that required of the basic role. Contribution pay is a two dimensional system.
Generally speaking, best practice dictates that if the company has a development focus, is keen to help employees realise their maximum potential and has development plans in place for employees then contribution pay is chosen over performance pay.
Give our Pay and Reward Consultants a call on 01506 828767 to discuss the support we can give you to enhance the performance of your organisation through the design of a performance management system to increase employee engagement levels and company profitability.