Pay for Performance:Complements or Substitutes Evidence from the UK private sector - Dissertation Example

Traditionally, it may be thought that the more individuals are paid, the more satisfied and loyal they become with respect to their jobs and employers (Dahlstrom and Lapuente 2011, p.575). Many scholars have refuted this notion stating that several factors impact employee motivation. Some of the most effective factors in this respect include: autonomy, job security, public recognition, acknowledgement and praise, fear, competition, leadership opportunities, remuneration, and financial rewards among others.

One of the strategies used by many private organizations to motivate and empower their employees is by offering them pay for performance or pay related performance (PRP). Commonly denoted as P4P, pay for performance involves rewarding employees based on their performance (Gielen, Kerkhofs and Ours 2010, p.292). The subject of and effectiveness of pay for performance has received a lot of attention recently, especially considering that many organizations are willing to sacrifice a little more just to ensure that they remain top performers in a competitive market.

With many analysts noting the effectiveness of P4P, one question that remains unanswered is whether pay for performance complements or substitutes other methods of motivation. 1.2 Main Aims The main aim of this study is to establish whether pay for performance complements or substitutes other methods of motivation. 1.3 Specific Objectives 1. To establish how companies in the UK motivate their staff 2. To establish the extent to which companies in the United Kingdom apply pay for performance 3.

To establish whether pay for performance complements or substitutes other methods of motivation. 1.4 Issues to be discussed and Significance of the Study A study conducted by the Massachusetts Institute of Technology revealed that where rudimentary cognitive skills are involved, P4P, in fact, results in poorer performance. The study however, established that if the jobs being done involve mechanical performance purely, P4P remains a most effective way of ensuring employee motivation and, therefore, increasing work performance.

With many UK-based companies applying pay for performance in motivating their staff, there is a risk of them achieving outcomes that are opposite of their expectations, especially where cognitive skill as opposed to physical skill is most applicable. 1.5 Research Methods This study will involve the analysis of performance based pay through secondary data. A quantitative analysis of the motivational strategy will be applied to establish its effectiveness in U.K. companies. The study will be limited to the private sector. 2.0 Literature Review Pay for performance is not a new concept in the modern world.

Involving the payment of workers based on how well they work, the concept of pay for performance is closely related to commission-based payment. The implication of pay for performance is that those who perform well get more pay even as those whose performance are low get low pay, possibly to the extent of realising that keeping the job is not worthwhile even if they are not fired by their employer. Different scholars have