ADVANTAGES AND DISADVANTAGES OF INDIVIDUAL PERFORMANCE RELATED PAY

Individual Performance Related Pay (IPRP) scheme is the tool for evaluating the firm's performance management. IPRP scheme can affect the whole payment of the individual working in the firm, or it can only affect a bonus which is given to the individual by his performance additionally with a fixed salary. Many managers have upheld IPRP because there is an increase in the workers' performance since they are paid based on their performance. Whereas another employee might suggest that applying the IPRP scheme has resulted in troublesome and staff cooperation has been undermined due to this policy.

The benefits an organization faces by implementing the IPRP scheme include facilitating changes in an organized manner, aligning the employees' objectives with the organization's broader goals, and providing organized rewards somewhat to the employees.

However, this scheme also has its drawbacks, such as it will only be successful if the end goal is sufficient for the employees to be motivated. There can be other concepts for managers to pay attention to, for example, the content, career development, and departmental resource development for the IPRP scheme to be successful. And considering the organization's key performance indicators of the employees, it is observed that this scheme does consider equality and fairness factors while rewarding the employees for their excellent work.

The theory of IPRP suggests that these approaches would consider the competitiveness of the employees along with the internal equity related to the pay disparities within the organization.

Individual Performance Related Pay (IPRP)

Individual Performance Related Pay is a system to pay the company's employees based on positioning the employee on their band of pay according to how those employees perform. Many companies use this system to evaluate and reward employees for their work and performance. This system motivates the employees to work more and earn more. However, when employees perform poorly, their rewards will be less than those who serve well throughout the season. This has led to the advantages and disadvantages of implementing this system as a performance management tool that firms can adopt to reward their employees.

Advantages of Individual Performance-Related Pay

There has been a debate between the advantages and disadvantages of the Individual Performance Related Pay scheme among the managers of different companies. Some members focus on the ability of this scheme to help the employees to work harder and look at their goals. These managers believe that these rewards and incentives boost the employees to reach their targets within the given time. Corporations can outline a few of the pros of adopting such a rewarding scheme for the employees, which are:

• The managers of an organization can use a defined framework to set goals for the employees.
• It helps the managers to upsurge their productivity and performance
• Since the rewards of the employees are based on their performance, employees are seen to be more focused on what they have to do and how to achieve their daily targets
• This system, at its best, rewards those employees who give outstanding performances
• This system is considered to be an efficient way of identifying employees with poor performances
• This system will help the organization retain its employees by rewarding the high performers
• A healthy performance-based culture can be established within the organization through the introduction of this scheme

Disadvantages of Individual Performance Related Pay (IPRP)

The following are the disadvantages of implementing IPRP as a performance management tool in an organization: 

• It will fail to motivate those staff members who do not need to earn extra rewards and need additional benefits
• It will damage the spirit of the teams due to the hostility caused among the team members because of IPRP's competitive nature
• It will result in increased control of managers over the staff members because of the threat given to the members that bonuses will not be given to those members who do not conform to their orders
• Therefore, many staff members of an organization will lodge their complaints against the inequality in the distribution of rewards caused by this IPRP system

Conclusion

Considering the pros and cons of an IPRP system, it has been identified that an IPRP is suitable in a trust business environment. If it is fabricated on an operative performance management system, where the management has clear goals and objectives and supports the organizational performance, then implementation of IPRP will be futile. Hiring assertive line managers who are experienced in evaluating the performance of the individuals compared to individual objectives, the performance appraisal might be judgmental and biased.