Performance Based Compensation System

Many organization use performance based pay system to increase there productivity. Every companies want to keep themselves in competitive race and control cost, now a days performance based pay system are becoming popular day by day. We will see how different companies are using performance based compensation.

Certain attempts are made to link the performance to compensation. Reasons to include performance based system are:

• to retain top performance.

• To adjust the labor cost with productivity.

• To reinforce company objective.

A company can base pay on individual, or group output or wide performance of the company. To be successful in plan employees must:

• desire to pay more.

• If they perform well expect them to give more pay.

• help them to improve their performance.

• trust the company to handle the plan fairly.