PRP schemes usually vary on the basis of different criteria, such as the area in which business works, the size of the company, different approaches to the choice of employees, etc.
Still, it is possible to distinguish the following common features, which are characteristic practically of all the PRP schemes: , it is also necessary to understand the main reasons driving employers when they decide to implement such schemes into their practice.
“Payment and results” and “payment and performance” should be dependent.
All companies are focused on the final effective results of activity, and that is why the total rewards for the employee’s work, including salary, must reasonably reflect the contribution of each employee or, more specifically, how effectively he works.
There are a lot of studies (Heywood S; Lazear, E; Miceli M. Almost all studies have confirmed the correctness of this theory.
It argues: those who work better than others, expect to see a direct relationship between how they perform the work and rewards for which they expect.
Introduction This paper is aimed at understanding whether performance-related pay can lead to improvement in employee’s performance and job satisfaction.
In order to answer this question, it is first of all necessary to research the nature of this payment system, analyze the reasons why employers choose it for their organizations.
Employees must be convinced of the strong association between receiving financial reward and productivity of their work.In order to do it properly, results of various studies will be analyzed.In the end recommendation on the choice of appropriate pay scheme will be offered and overall conclusions will be drawn to finally answer the initial question.Ability of reward system to encourage and satisfy the employee depends on the structure of the system and the degree of realization of it.Different companies have developed many different systems and practical ways to reward and effectively stimulate employees to achieve satisfaction of each worker.There can be different performance measures like knowledge, skills and some behavioral indicators.The main arguments for PRP usage is that with its help motivation is increased, as well as cooperation is better established and firm’s results are maximized.Studies have shown that although most managers proclaim their commitment to “pay for performance” system, in practice they reward the employee work in accordance with his experience and time spent at work, rather than on the characteristics of the results achieved.Theoretically, an organization must achieve a unique interdependence between what and how an employee works and what reward he receives.Though satisfaction of the individual of his work depends in part on how his expectations match with what he actually receives. (2007) in their article state that satisfaction of employee also depend on how similar work is rewarded in other organizations. (2001) states that employee satisfaction is also dependent on the complex incentives.Sense of satisfaction or dissatisfaction arises in the process of comparison of their work, skills, education and the labor effort of the applied external and internal factors, stimulating work, i.e., returns to labor. That is, the worker compares the ratio of input / output with the same ratio for other employees. Obviously, the moral and material incentives are equally important and can not be substituted for one another. W.) testing how the theory of expectations helps to predict the behavior of workers.