Hi everybody,
Can you please tell me the merits and demerits of PERFORMANCE LINKED PAY? If possible, also about the organizations which started this practice of paying according to the performance.
Regards,
Amit
From India, Delhi
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3Can you please tell me the merits and demerits of PERFORMANCE LINKED PAY? If possible, also about the organizations which started this practice of paying according to the performance.
Regards,
Amit
From India, Delhi
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Hi Amit,
Many organizations have two components in their pay (CTC). In our organization, it is as follows:
- Fixed pay
- Variable performance-linked pay
The fixed pay is called Annual Guaranteed Cash (AGC), which is what you get irrespective of your performance. The variable component (which is 20% of CTC for us now) is entirely dependent on your performance, which is measured by KRA - Key Result Areas.
Advantage: Better performers get paid more (usually).
Disadvantage: Sometimes the KRAs tend to become subjective, and then what you receive depends on other extraneous factors rather than performance. This is typically true for staff functions where performance cannot be measured in terms of "numbers," as is the case in functions like sales, buyer (purchase), etc.
Many companies have already transitioned towards the 'balanced scorecard.'
Bala
From India, Madras
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Many organizations have two components in their pay (CTC). In our organization, it is as follows:
- Fixed pay
- Variable performance-linked pay
The fixed pay is called Annual Guaranteed Cash (AGC), which is what you get irrespective of your performance. The variable component (which is 20% of CTC for us now) is entirely dependent on your performance, which is measured by KRA - Key Result Areas.
Advantage: Better performers get paid more (usually).
Disadvantage: Sometimes the KRAs tend to become subjective, and then what you receive depends on other extraneous factors rather than performance. This is typically true for staff functions where performance cannot be measured in terms of "numbers," as is the case in functions like sales, buyer (purchase), etc.
Many companies have already transitioned towards the 'balanced scorecard.'
Bala
From India, Madras
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