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Linking Performance to Pay

Date: 08/30/2006 | Category: Business | Author: developers

Business owners know the importance of paying a competitive salary if they want to retain a quality workforce.  However, it’s not always easy, and in some cases, can result in a gamble that increases their overall fixed costs.  One solution is providing bonuses based on performance.  While not a new idea, it is one that is growing in popularity with employers according to a recently released Hewitt Associates Inc. survey.  Hewitt is predicting that raises for non-executive white-collar workers will average 3.7% next year which is slightly higher than 2006 and 2005. 

Eighty percent of companies offer a bonus plan this year and are making more employees eligible for those bonuses.  However, those companies are not making it easier for employees to earn top payouts according to Watson Wyatt Worldwide.  A survey by Watson found that 30% of employers planned to raise their expectations for individual performance.  

Pay for performance obviously has its supporters as well as opponents.  Opponents believe that you can set your performance goals so high that employees loose interest, motivation, and are demoralized by their inability to achieve those goals.  Experts suggest that if you choose to pursue a pay for performance plan, create a program with realistic goals and objectives that are clearly communicated to the employees eligible for the program.

For more guidlines on such issues of small business visit a all state incorporation services. or call at 888-284-3821.