Performance related pay (PRP) links additional payments to individual employees, over and above basic salary and cost-of-living increases, to assessment of the individual's performance. Every employee is set targets at the beginning of the year. Depending on how well the person has done in meeting those targets by the end of the year the employee is awarded a sum of money that is paid on top of next year's salary.

Checklist

1. Design a performance-related pay committee - Members of the PRP committee should be drawn from levels of the organisation affected by the scheme. They will manage the design and implementation of the PRP scheme.

2. Define the scope and coverage of the scheme - Will all staff be eligible or do you intend to cover a particular group?

3. Gather information - Find out whether members of the committee or other members of staff have been involved in PRP before. If so use their experience. Do some background reading to find out about schemes operating in similar organisations.

4. Draw up the scheme ensuring that it is:

Simple and easy to understand
Has a clearly defined relationship between performance results and amounts awarded
Is consistently applied
Includes an appeals procedures for employees dissatisfied with their assessment
Contains a system of review and evaluation

5. Define your performance measures, will it be:

Qualitative - based on criteria for individual jobs (job specifications)
or
Quantifiable - based on targets (usually financial)

6. You should provide:
A scale for rating. Most rating systems use a 6-point scale with a link between the rating and pay award .
A timetable for assessment - line managers should meet with employees they supervise throughout the year.
An appeals procedure: let each member of staff know who to contact if such a situation occurs.

7. Train managers to assess performance - Communicate the scheme to all staff - use team briefings and individual discussions to disseminate information about PRP.

8. Pilot the scheme - Depending on the size of your company it may be advisable to concentrate initially on one department or level of management.

9. Review and evaluate the scheme - The PRP committee should meet at the end of the year to review how well PRP is working.

Do's and Don'ts

Do:

Design the most appropriate scheme for your organisation.

Involve staff representatives or union officials.

Communicate advantages of PRP.

Set clear links between objectives, effort and reward

Don't:

Don’t make the scheme too complicated.

Don't allow inconsistencies between managers in appraising performance and applying awards.

Click here to return to the Checklists

Information supplied by Business Insight
Central Library, Chamberlain Square, Birmingham. B3 3HQ
Tel: 0121 303 4531 Email: business.library@birmingham.gov.uk
www. birmingham.gov.uk/businessinsight
www.bestforbusiness.com
Alternatively, click here for our Know How Guides.

Golden Entrepreneurs: Disclaimer Notice

GoldenEntrepreneurs.com does not have any responsibility for, or be liable in respect of the content or accuracy of the information so provided, or for any errors or omissions therein.
The Information provided is generic and is researched using a variety of sources. Major sources are acknowledged.