In this article, practical tips and lessons learned are shared. The need to link pay to performance has never been greater, and good, robust frameworks make this easier to implement. Dr. Mark Bussin explores several possible framework
by Dr. Mark Bussin
ABOUT THE AUTHOR
Dr. Mark Bussin is Executive Chairman of 21st Century Pay Solutions Group (Pty) Ltd, one of the biggest remuneration consultancies in Africa. Known for delivering pragmatic, usable solutions that are easy to administrate, 21st Century Pay Solutions’ client base includes over half of the top 250 companies in South Africa. Contact them on firstname.lastname@example.org or call 011 4470306.
PRP ― a definition Performance related pay is pay that varies depending on individual, team or company performance. High performance is a standard we strive for in all of life’s activities; it is doing a difficult thing well, and it often commands admiration and reaps rewards.
PRP as applied to individuals, is associated with salary structures, grades and a performance and/or competence rating. It differs from incentive schemes that are team or company based, as these schemes are normally formula-driven and the payments are once off. In individual PRP schemes, a rating often affects the size of a pay increase within the available budget. The differences between team and individual PRP are summarised as follows:
Table 1: Key differences between individual and team PRP
Usually associated with management’s assessment of performance and/or competence.
Based on quantitative and qualitative measures.
Payment is often in the form of a pay increase.
Payments are mostly annual.
Typically formula driven.
Based mainly on quantitative measures.
Payments are usually once off.
Payments can vary from monthly to every 3 years.
Reasons and objectives
Organisations implement PRP for a variety of reasons, but the most common objectives are to:
strengthen the relationship between performance and reward;
drive company strategy implementation to individual level;
retain top performers by rewarding them for sustained superior performance;
send a clear message to non-performers, usually accompanied by counselling and/or training;
institutionalise a performance culture within the company;
facilitate and necessitate performance contracting resulting in performance reviews and assessments.
link the onerous salary and wage bill to the financial results of the organisation; and
differentiate rewards in a defensible manner.
Research conducted by several major international organisations shows that those organisations with developed PRP and performance management systems, outperform their competitors on almost every measure.