Effectiveness Of Pay For Performance Initiatives

Workers can respond by voluntarily working harder. – Legislated increases in the minimum wage improves workers morale thereby increasing their productivity. The increase in productivity helps balance off the increase in labor cost. An increased wage rate causes an income and substitute effect. Income effect causes the worker to work fewer hours now that their income increased. Substitution effect causes the worker to work more hours.

According to the National Employment Law Project (NELP), one benefit an increased wage would bring would be an improvement in overall productivity resulting in a reduced turnover rate for the company (NELP, n.d.). It makes an employee want to come to work and perform at an optimal level if they are being paid well. Basically, the more we are paid, the better we want to perform and the more we will show up for work. Job satisfaction plays a huge role in an employee’s willingness to commit to a company. If we are satisfied with our employer and the pay, chances are we are going to remain with that employer. That is why this would ultimately reduce the employee turnover rates of companies. Good pay is an extremely important factor in job satisfaction. Some

Increasing the wage for all employees will cost a lot of money for employers. Business will be faced with two decisions, either “raise their prices”, or “simply cut employees or reduce benefits” (Williams). If they choose to raise up prices, then there will be no benefit for the increase of wage. Employees will get an increase in wage, but so is prices of almost everything. And if businesses choose to cut employees and benefits, then the number of unemployment could possibly arise, and the benefits such as paid vacations and PTO, can be easily get demolished.

Additionally, if the employee produces more, the overall productivity of the firm will increase as well. The system is also cost effective, as the firm is only paying for what is produced. Therefore, the firm saves if an employee’s production numbers are low, as the employee only get paid for what is produced. If an employee knows that his or her pay is based on how much is produced, then he or she would be less likely to waste time conversing with co-worker or lollygagging. When you look at the big picture, all of these advantages are intertwined. For example, I work for the Department of Safety as a Driver’s License Examiner for five years. During that time and currently, customers complain about the slothfulness of the examiners and the long wait times. However, examiners (including myself) also complained about the work ethics of their co-workers. It was also stated by one examiner, during a meeting, that he was compensated by the hour not per customer, when I complained about the slowness of some examiners. If this system was implemented, it would motivate, otherwise less motivated employees, to be more productive, as they would be compensated base on how many customers they assist per day. This would increase productivity, thereby, decreasing complaints and customer wait times, save the state funds, and employees would be less apt to waste time

Body3: (There are many jobs that dislike paying high wages. Therefore, many employers hire less to save money. This causes a non-sufficient pay rate for comfortable living and high unemployment rates.)

Many people in the United States believe that a wage increase will benefit the poorest minimum wage worker. However, this is not the case. To save their companies from financial distress, many owners will decrease the number of hours they work their employees. Instead of

Setting a reasonable minimum wage point is key to attracting workers who are available to perform well in a workplace, it could potentially increase productivity as workers become satisfied with the increase in pay. “Supporters of the minimum wage often voice an inherent distrust of business owners’ interest in keeping wages in line with cost-of-living increases and argue that the minimum is vital for protecting workers against exploitation” (Aliprandini and

In this globalization era, as various countries see growth in their economy, there has also been significant differences in the wages set to employees in different countries. The lowest wages set by the law that are fixed to a particular amount which is also defined to be the price floor below which workers shall not sell their labor, has its own effects. The minimum wage law came into force as a matter of social justice amongst the low-wage workers, also to reduce exploitation and see that workers can afford the standard basic living expenses and necessities, not to increase the unemployment rate, indeed to increase the employment rate.

Ton continues to talk about how having these workers well payed saves the company money and will always be worth it. Surowiecki believes that regardless of how much more you pay a worker, the company can still mistreat you. What leads to this is, “market forces” and “declining union strength. (Par.

The introduction of minimum wage, or an increase in the minimum wage burdens the employer with increased costs, so the employer will seek to levy this burden onto the labor force to compensate for these additional costs. Veldhuis supports this by contending that minimum wage causes employers to “respond by reducing the number of workers they employ and/or the number of hours their employees work”. (1) This reaction is explained by theories of producer behavior. Economic theory states that firms are profit maximizers. Therefore, to maximize profits, the firm must minimize costs. A firm minimizes costs when the slope of the Marginal Rate of Technical Substitution is equal to the rate at which capital can be traded for labor in the market (-w/r). This is expressed by the equation = . As illustrated in

Pay for performance systems have further been proven to have two advantages for organizations: attracting more high-quality employees and motivating employees to exert more effort at their jobs. (Gordon, Kaswin) This paper will show the positive benefits of performance pay as

This is one way to drive wages up. An alternate approach recognizes that workers who are happy in their jobs, who are paid more (perhaps above market), tend to work harder. Higher wages also reduce job leaving propensities and the cost of training new workers. Overall, workers whose productivity is rewarded tend to be more efficient. Rewarding productivity mitigates income inequality. This is more benign than fear-driven wages increases due to labor shortages resulting expelling undocumented workers and building a beautiful wall.

O’Neil (1998) suggests six minimal criteria for the design of a performance based pay system. The first of these criteria is that the reward system should be self-funding, that is, the performance increases should as a minimum offset the cost of the rewards provided. The second criterion is that the distribution of the rewards must be consistent, fair and justifiable. In addition reward plans must be transparent and clearly communicated. The third criterion

Although research generally confirms that pay-for-performance plans can influence greater outcomes, it is unclear how effective different pay plans are relative to each other (Park, 2012). Like most things in business, compensation is something that requires evaluation, study, assessment, strategy, modeling and integration.  Achieving a pay for performance culture does not happen without paying attention to the behaviors, activities, rewards and motivations that have to be linked and reinforced through a well engineered and successfully executed process.  Actually if that process does not tie rewards to shareholder financial objectives, employ the proper mix of compensation elements, result in meaningful dollars, embrace performance that employees can impact and are effectively communicated and reinforced, then the results it produces will likely fall short (Vision Link Advisory Group, 2013).

Pay for performance is to link employees’ salary or salary increase to his or her performance. It seems to be a reasonable or attractive idea but it often does not work well in organizations. Please use at least 4 motivation theories or models to explain why pay for performance may not work as expected—particularly in government and nonprofit organizations.