• Skip to main content
  • Skip to primary sidebar
  • Skip to footer

Sozo Firm

  • Home
  • About
  • Services
    • Business Efficiency
    • Time Management
    • Customer Service
    • Management Coaching
    • Sales & Marketing
    • Internet Strategies
      • Search Engine Optimization
      • AdWords Campaign Management
  • Request a Proposal
  • Blog
  • Contact
You are here: Home / Employees / Increase Employee Motivation With Performance-Based Pay

Updated on September 20, 2022 by Sozo Firm Leave a Comment

Increase Employee Motivation With Performance-Based Pay

Performance-based pay is a highly effective strategy for increasing motivation among employees. Although financial rewards aren’t the only things that motivate employees, they can be very effective when properly implemented. The possibilities for performance-based pay come in many variations, and each will have to be tailored to the specifics of your company in order to be effective. Below you will find some common types of performance-based pay plans:

Performance Bonuses

Performance bonuses are very common, in part because they are a fairly basic type of performance-based pay. To award bonuses, a company rates the long term or short term productivity or performance of an individual employee, a team of employees, or an entire department and then uses that evaluation to award a special bonus. These bonuses are often not given in predetermined amounts; rather, they are determined on a case-by-case basis and are given for exceptional performances. While performance bonuses can be very effective, employers must be extremely careful in the implementation of this technique. Because these bonuses are not given in standard amounts or frequencies, some employees could make a case for favoritism if the bonuses are not well-planned. Therefore, award these bonuses with caution and with an explanation.

Gain Sharing

Gain sharing involves compensating certain parts a company with the financial rewards of the business’s improved performance. Basically, if a company sees increased cash flow, a pre-negotiated percentage of the financial gains is awarded to the employees responsible. This encourages increased productivity among employees by sharing the rewards of their hard work, with the basic premise being that if employees see how their hard work directly benefits the company and themselves (in the form of gain sharing bonuses), they’ll want to improve their performance.

Profit Sharing

On the surface, profit sharing seems very similar to gain sharing. The difference between the two, however, is very important. Unlike gain sharing, profit sharing is not linked to the performance of an individual or a department, but rather is related to the profits of the whole company. As with gain sharing, increases in the company’s profits are distributed among employees according to a pre-negotiated formula, but unlike gain sharing, the focus is not on the performance of one single employee or department. Instead, profit sharing emphasizes the importance of teamwork within a business by dividing financial rewards among all employees, not just those in the group responsible for the profit increases.

Skills-Based Rewards

In a skills-based rewards system, employees are financially compensated based on the number of skills they obtain that are relevant to their job. In some companies, instead of giving annual raises automatically, employees have the option of receiving additional training for skills that the company thinks will improve their performance at work. If the employee chooses to attend the training session, they get rewarded or receive a raise. If they choose to opt out, they receive no reward or receive a smaller raise. This method is based on the simple idea that employees with more relevant skills will be more productive, and compensating employees is a great way to encourage them to become trained in those skills.

All types of performance-based pay plans can increase motivation and productivity in a company, but not every type will work for your business. You’ll have to determine on your own whether the above types of performance-based pay systems will be appropriate for your company, but whatever you decide, remember this simple fact: Employees who feel appreciated and well-compensated are more likely than under-appreciated employees to be loyal, to work hard, and to care about the future of your company.

Filed Under: Employees, Featured, Management

Reader Interactions

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Primary Sidebar

Contact Sozo Firm

Toll Free: (800) 460-7696
Office: (717) 885-2312

Project Waitlist Status

Please note that we do have an active waitlist.

Due to our current project load, we are being very selective with any new projects we consider.

Inquiries from the following are always welcome: referrals, nonprofit organizations, startups, and small-mid size businesses/corporations in need of long term consulting.

Recent Articles

  • Dealing With Difficult Clients
  • Improve Customer Retention With These Five Simple Steps
  • Free Up Cash Flow and Eliminate Personal Loans By Leasing Equipment
  • Create a Procrastination Free Schedule
  • Improve Overall Production and Cut Costs With a Four Day Work Week
  • How Do You Handle Upset Customers?
  • Tips for Undergoing the Transition from Employee to Manager
  • Compliance Is Key When Implementing Employee Layoffs
  • Help! I Hired the Wrong Person. Now What?
  • Avoiding Discrimination During the Job Interview Process

Recent Comments

  • Ernest J Curcio on Email Efficiency Tips
  • Giy on Help! The Web Designer Stole My Domain!
  • Protege Pools on Help! Negative Reviews Are Killing My Business
  • Alhassan Fuseinatu on 10 Ways to Prevent Layoffs
  • Luke Sutton on How Valuable Are Your Customers?

Footer

Areas Served

Sozo Firm serves clients throughout the United States with a concentration in the New York City, Philadelphia, Charlotte (NC), and Washington (DC) regions. International clients are considered on a case-by-case basis.

Sozo Firm is conveniently located within a short drive of the following cities: Baltimore, Hunt Valley, & Bel Air, MD; Washington, DC; Wilmington, DE; Harrisburg, York, Hanover & Lancaster, PA.

Contact Sozo Firm

Sozo Firm Inc
New Freedom, PA
Mailing address

Note: Due to high demand, Sozo Firm currently has a wait list for new projects.

Email Sozo Firm
Toll Free: 800.460.SOZO
Office: 717.885.2312

Services Offered

Business Consulting
• Efficiency Consulting
• Sales & Marketing Consulting
• Startup Consulting
• Customer Service Consulting

Audits
• Business Efficiency Audit
• Advertising & Marketing Audit
• Website Usability Audit
• Customer Service Audit

Copyright © 2021 Sozo Firm Inc · Sitemap · Privacy Policy