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A strategic element of compensation known as performance-based pay links employee benefits to their individual or group performance outcomes. Organizations can inspire workers, boost productivity, and accomplish strategic goals by linking pay to performance (Martocchio, 2020). “Managers often rely on their discretion to adjust the performance-based pay of employees” (Dierynck & van Pelt, 2021, p. 1). The benefits of performance-based pay as a strategic component of compensation will be highlighted, along with the biblical concepts that justify its application.
Employees are rewarded based on their personal contributions, achievements, or the accomplishment of predetermined goals through performance-based compensation (Dierynck & van Pelt). The following are a few major advantages of including performance-based pay in a compensation strategy:
Employees are motivated to work harder and strive for excellence thanks to performance-based pay. Employee motivation and engagement are more likely to increase when there is a clear connection between performance and rewards (Martocchio, 2020). The desire to succeed can result in greater productivity, better performance results, and an increased degree of dedication to achieving organizational objectives (Martocchio, 2020).
It tells us in Colossians 3:23-24, “Whatever you do, work at it with all your heart, as working for the Lord, not for human masters, since you know that you will receive an inheritance from the Lord as a reward. It is the Lord Christ you are serving” (New International Bible, 1978/2011).
This verse stresses the significance of working relentlessly and wholeheartedly, not just for human masters but also with awareness that serving the Lord will be our greatest reward.
Through performance-based pay, compensation is made sure to be directly related to achieving strategic goals. Organizations can align individual efforts with greater organizational goals by establishing concise and quantifiable performance goals. By ensuring that employees prioritize actions and behaviors that contribute to the success of the organization, this strategic alignment promotes a sense of purpose and focus among all employees (Martocchio, 2020).
In Proverbs 16:3 it states, “Commit to the Lord whatever you do and he will establish your plans” (New International Bible, 1978/2011).
This verse emphasizes how crucial it is to entrust the Lord with our work and to align our plans with His will. This idea is supported by performance-based pay, which motivates staff to dedicate themselves to consistently strive for organizational goals.
Performance-based pay offers an explicit and objective framework for determining compensation, promoting equity and fairness within an organization (Martocchio, 2020). It makes sure that employees are compensated for their actual performance, fostering an environment where people are valued and rewarded for their contributions. A fair workplace environment and higher employee satisfaction can be encouraged by this strategic element (Martocchio, 2020).
“The appetite of laborers works for them; their hunger drives them on” (New International Bible, 1978/2011, Proverbs 16:26).
The importance of a worker's appetite, which can be viewed as their drive and desire to work, is emphasized in this verse. By recognizing and rewarding employees' efforts and motivation, performance-based pay acknowledges this biblical principle and establishes a just and fair compensation structure.
Performance-based compensation can be used as a tool to draw in and keep top talent. Individuals with high performance levels are frequently motivated by challenges and chances for success and advancement. Organizations can gain an advantage over their competitors by providing performance-based rewards to talented employees who are driven by the possibility of receiving compensation for their exceptional performance (Gerhart & Fang, 2021).
Performance-based pay is a strategic element of compensation that offers both employers and employees a number of advantages. Employee motivation, individual effort alignment with organizational goals, fairness and equity promotion, top talent attraction and retention, encouragement of continuous improvement, and the development of a results-oriented culture can all be achieved by tying compensation to performance outcomes.
Reference
Dierynck, B. & van Pelt, V. (2021). The sorting beneftis of discretionary adjustment to performance-based pay. Management Accounting Research, 52. 1-13.
Gerhart, B. & Fang, M. (2021). Performance-based pay and employee engagement: An integrated model and research agenda. Human Resources Management Review, 31(1). 101-115.
Martocchio, J. J. (2020). Strategic compensation: A human resource management approach (10th ed.). Upper Saddle River, NJ: Pearson
New International Bible. (2011). Zondervan. (Original work published 1978)
