Abstract
Performance-based pay system acknowledges employee dedication and nurtures a high- performance culture which is important for both short-term and long-term organizational success (Allen, Whittaker, & Sutton, 2017). In the past, the government had a great say in employee salary and remuneration. Wages were negotiated and influenced by government regulation (Hegewisch & Filella, 2017). In those days, productivity and profit played no significant role in influencing pay increase. However, things have changed and productivity significantly influences pay increase and job promotion. This study was conducted on two dominating Saudi Arabian companies: Saudi Telecom Company (STC) and Saudi Electric Company (SEC), to investigate the impact of PRP on the performance of the employees in the two industries. The research was conducted on 141 employees in both companies (n=141). The sample was comprised of 131 departmental employees and 10 supervisors. The investigation used a mixed methodology approach where both interviews and questionnaires were applied in the collection of data and SPSS was used to test the main hypothesis. Additionally, various credible sources were used in collecting information on studies conducted previously on PRP by other researchers. The results collected during this study proved that PRP has minimal impact on the performance of the employees, but it works effectively as an employee control system; the system acts as a motivational system but issues like favoritism, lack of team work and clear definition of performance standards prevent the system from being effective. The main limitation of the study, was the time constraint that prevented more respondents from being interviewed. Hence, the interpretation of the results should not be over generalized. Keywords : Pay related performance, compensation, motivation, incentives, benefits, culture DOI : 10.7176/EJBM/12-3-14 Publication date: January 31 st 2020
Highlights
Employers are always seeking to increase the efficiency of their staff by linking payment to performance
The study tested the two hypotheses: Hypothesis 1: Performance-related pay (PRP) is positively correlated to improved employee performance Hypothesis2: there is a significant change in the organization after the introduction of PRP in the organization
When the respondents were asked whether they were motivated by the performance-based pay 75% from Saudi Telecom Company (STC) and 78% from Saudi Electric Company (SEC), rated the system as very satisfactory, 15% STC; 19% SEC, were not sure whether the system was effective and 10% STC; 3% SEC, gave an affirmative not satisfied, as they claimed the system only favors some people while others are not taken into consideration
Summary
Employers are always seeking to increase the efficiency of their staff by linking payment to performance. Organizations that have already implemented execution-related pay are likely to attract talented workers and encourage the employed workers to put in more effort. Productivity in the organization is affected if the morale of the employees is low, to ensure job satisfaction, companies have implemented monetary incentives to encourage excellent performance. In an increasingly competitive corporate world, companies are more invested in performance management to maintain and improve the standards of the organization. Performance management is effective in communicating the employees the basics of excellent performance and guiding them on how it can be attained. In linking performance and pay, employers are working on reward management in the organization, which means the recognition of effort and using incentives to improve the performance
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