PERFORMANCE RELATED
PAY- (PRP)
Part 1 –
Background and Advantages (28/3/2018)
Part 2 –
Challenges and a snapshot of the components to consider for a successful PRP
system in your organisation that is ‘robust’ (4/4/2018)
Part 1 – Background and Advantages
PRP systems were introduced as long ago as 20
years in many countries, but many of these systems were not well designed and
results were therefore erratic.
The assessment of competencies, as
well as the achievement of performance targets, provides a more rounded view of
an individual’s contribution to business goals. Many organisations now assess
performance based of both inputs and outputs, reflecting the move to
contribution‐related pay.
Examples
of the “inputs” can be years of service, the type of job function and the
length of time in the current job, attendance, team effort, demonstration of
culture/values, qualifications, experience, competencies, the complexity of the
job and the like.
Examples
of ‘outputs’ can be the standard time to do a job function, a certain number of
quality approved items, the achievement of a certain production target and
others. In more service orientated organisations, outputs could be the
completion of certain tasks within a time period, alignment with a quality standard,
customer
satisfaction, and the like.
Today’s
thinking is measuring employee’s inputs and outputs, not activities, as these don’t lead to improvements in productivity.
It is necessary to develop a culture of inputs and outputs that are SMART- Simple, Responsible,
Measurable, Realistic and Time related, for a successful PRP system.
However with many workers just trying
to survive in the current South African climate, money is still a successful
motivator, and is sometimes seen as a symbol of external status and internal
recognition.
PRP
is moving towards, pay based partially on individual performance, and also part
of a team performance, linking it to productivity, instead of year on year
increases linked around CPI or some other yardstick.
In designing a
PRP
system one has to be careful of not infringing upon the “Equal Pay” aspect in the Employment
Equity Act. Yet, different wages or conditions can be paid to
people doing the same work, substantially the same work, or, interchangeable
work as long as there are valid reasons for doing so. A scoring system based on
several criteria must be consistently applied to all staff for the differences
to be “justifiable ".
So what does a “robust” PRP system look like? One where a
remuneration package is made up of as many as 4 components, with several
“input” items and one or more “output” items. The makeup and weighting of which
will differ from client to client and different by industry type.
PRP systems need to be differently
structured for the public sector, including NPO’s and the private sector. They
need to be different for manufacturing industries, knowledge based industries,
service orientated industries, and consideration of Sectoral Determinations
wages as well as Bargaining Council Agreements.
There are many
objectives of an effective PRP system.
For example: The
maximising of employee engagement - having staff who are engaged with a
business rather than actively disengaged and just coming to work because they
need to earn a salary. This can be achieved because staff have a greater sense
of participation by identifying “inputs” and having measurable “outputs”
thereby giving a greater sense of
contribution/control which in turn encourages staff ‘buy in’, commitment and staff retention. Recognised Prior
Learning (RPL) can significantly assist employees who have the experience, but
not the formal qualifications, to improve their scoring on one of the input
items.
Annual
employee performance appraisals are fast becoming an outdated review system and
are often being replaced with a ‘simpler but smart’ performance feedback
sessions, which can be done several times year, or even monthly, for maximum
relevance.
Because Sectoral
and Bargaining Council determinated pay applies in different industries the
base pay for certain categories of work function need to be accommodated in the
PRP system, with employees not earning less than the stipulated amount. Engaged
and higher productive employees will then benefit from their efforts.
At Diverse
Human Resources we take a different approach to annual increases and thirteenth
cheques, and Performance Appraisals that are only done once or twice a year.
We are working
on PRP with several clients to implement systems that are specifically designed
for their unique requirements.
In part two to
be posted on the 4th April, we will discuss the challenges and
potential pitfalls of an incorrectly structured PRP system and also explain
some criteria to develop a successful one.
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