The range of the number of surveys that have been carried out is between almost 3500 to 4500 employees. This report aims at analysing the research and to gain a better perspective on the theories of performance related pay and its affects.
One of the common factors those interest employees, employers and the government equally is the most essential element of employment - Pay. Pay affects the employers because it is an expense borne by the business and employee performance matters a lot to the business. Also this factor affects the employer's ability to recruit and retain labour force of quality. Employees are affected by pay as it is the only source of income it also sets the standard of living and measures a value for the performance and value of service. Lastly the government is affected by this since it directly affects the macro economic stability like employment, social economic development, inflation etc. There are a number of different basis on which pay to an individual is decided. One of the oldest forms of pay is Performance Related Pay this is discussed in detail in the next few parts. Performance Related Pay refers to pay scheme used to measure individual performance in the company (Monks, 1997). It can also be used to measure group or organisational performance. The main objectives of introduction of performance related pay were to increase motivation in employees to perform better, increase the self esteem of employees, provide better understanding of the job description and functions, create better communication amongst the participants, encourage employees to be self motivated, and help improve the institutional manpower planning. (Mohrman, Resnick-West & Lawler, 1989). Also performance related pay helps to contribute to overall performance and productivity, along with motivating employee to work better by linking the pay to the achievements of target rather than the length of service. It also helps recognise the achievements of individuals and identifies the under performers, thus creating fairness in pay (Monks, 1997). It was noted that performance related pay has proved to be useful for managerial staff since it allows them to be able to set goals that need to be achieved. This makes them motivated to work towards the goals as performance related pay ensures them of a reward on achievement of the goals. The principle of relating pay and performance has been very useful and has acted as a good motivator (Kessler, 1994).
Linking of performance and pay is mainly based on Improved Motivation. Famous authors and researchers like Lawler, Porter, and Vroom have pioneered psychological theories of expectancy. The theory should a simple relationship between the efforts put in by an employee, the rewards, the motivation of the employee and the possibility of gaining if the required