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Muse HR: What is Pay for Performance?

When employees are paid based on productivity as opposed to a set salary or wages paid based on hours worked, is referred as Pay for Performance. It is common in sales, where commissions and bonuses are based on sales closed or revenue secured via those sales.

If you want to have an organisation that promotes merit based performance, then you should consider a Performance Management that pays for performance. The merit based pay normally is dependent on the following criteria: 1. Market median of salary ranges for respective jobs and roles. 2. Company performance and profitability to determine the internal salary ranges and increases. 3. Group or department performance and goals achieved. Meaning some departments may get more budget vs others for their groups performance. 4. Individual performance based on their rating and goals/KPI achieved. 5. Internal compensation policy, whether it's a lead or lag within the industry.

As the year ends, many companies are looking at revisiting their performance evaluations, pay ranges and setting new goals. It's an ideal time to re-set and establish new expectations with pay for performance with their staff for the upcoming year.

To learn more about Performance Management, Goal Setting & KPI trainings, email your inquiries to:


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